The central government is not keen on “going all out” to aid the recovery of debt-laden telecom firm Mahanagar Telephone Nigam Ltd (MTNL) and will stick to honouring existing commitments made on payment of interest on Sovereign Guarantee Bonds, sources told Moneycontrol. This indicates that further monetisation or a merger is unlikely.
“All Government of India commitments are bound to be honoured, so we have given around 152 crores in two tranches so far. We will honour all the guarantees. But we are not going to go all out to save them. Beyond the stated commitments, there is no good reason to give more funds to MTNL,” one official said.
According to a Bloomberg compilation, the loss-making firm has Rs 42,680 crores of interest and principal repayments due on local-currency bonds guaranteed by the government by 2034. Of this, Rs 4,620 crores are due later this year.
"The Government is clear that they will honour any principal plus interest. It is a sovereign guarantee, so they can't default," a second official said on condition of anonymity.
The state-run telecom firm’s loss widened to Rs 8,17.58 crore in the fourth quarter of FY24, 2024, primarily due to high finance costs. The Finance Ministry did not respond to a mail seeking a comment on the matter.
This official also confirmed that there are no plans to merge MTNL with the state-owned Bharat Sanchar Nigam Ltd (BSNL).
Currently, MTNL offers services in Delhi and Mumbai, while BSNL serves the remaining country.
Back in 2019, the government decided to merge the two ailing firms- BSNL and MTNL - as part of a revival package that included raising sovereign bonds, monetising assets, and establishing a voluntary retirement scheme (VRS) for employees. However, due to operational challenges and high debt levels, especially of MTNL, the merger has not yet occurred, as it would exacerbate the financial issues.
BSNL and MTNL have struggled to compete with private telecom companies mainly due to the lack of 4G and 5G services. These state-run telcos have been losing subscribers every month because of the absence of the latest telecom technologies.
“There should not be expectations of further monetisation for MTNL beyond the existing commitment on repayment of dues arising from sovereign guarantee bonds,” the first official added.
The government, in the Budget, proposed to allocate Rs 3,668.97 crore for the payment of the principal amount of MTNL bonds.
Sources confirmed that MTNL's entire operations will be transferred to BSNL, which is already managing the wireless operations.
In 2022, the Cabinet decided to restructure the debt of both telecom firms. The plan was to provide sovereign guarantees to the firms, enabling them to raise long-term loans and restructure their debt.
Once the debt restructuring is completed, MTNL's entire operations will be looked after by BSNL, sources added.
BSNL held a 7.46 percent subscriber market share at the end of April this year, while MTNL’s share was a mere 0.16 percent.
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