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Government may hand over MTNL to BSNL via agreement instead of merger


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The government is evaluating the possibility of transferring the operations of Mahanagar Telephone Nigam Ltd (MTNL) to Bharat Sanchar Nigam Ltd (BSNL) through an agreement, as opposed to a merger. This information was disclosed by a source familiar with the matter.

Timeline for Decision

A final decision on this matter is anticipated within a month.

Rationale Behind the Agreement

According to the source, transferring the operations of the debt-laden MTNL to BSNL is under consideration due to MTNL’s significant debt. A merger with BSNL was deemed unfavourable given MTNL’s high debt levels.

Approval Process

Once a decision is made, the proposal will be presented to the Committee of Secretaries. Following this, it will be submitted to the Cabinet for approval.

Financial Challenges Faced by MTNL

MTNL has been grappling with mounting financial difficulties. This week, in a statutory filing, MTNL announced its inability to make interest payments to certain bondholders due to insufficient funds.

“The second semi-annual interest regarding the 7.59% MTNL bond series is due on July 20, 2024. According to the structured payment mechanism of the Tripartite Agreement (TPA) signed among MTNL, the Department of Telecom, and Beacon Trusteeship Ltd, MTNL must fund the semi-annual interest into the Escrow account with adequate funds 10 days before the due date,” MTNL stated.

Due to insufficient funds, MTNL was unable to fund the Escrow account adequately, as per the provisions of the TPA, the corporation explained in its BSE filing.

Service Areas

MTNL provides services in Delhi and Mumbai, while BSNL operates across the rest of India, excluding Delhi and Mumbai.

Declining Subscriber Base and Financial Performance

Despite the growing subscriber base of private telcos like Reliance Jio and Bharti Airtel, MTNL has experienced a decline in its customer base, from 4.66 million (wireless and wireline) in January-March 2023 to 4.1 million a year later.

MTNL’s losses increased to ₹3,267.5 crore in FY24 from ₹2,915.1 crore in FY23. Revenue from operations for the last fiscal year was ₹798.56 crore, a 14.6% decline from the previous year.

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