The government will no longer infuse any fresh capital into ailing Mahanagar Telephone Nigam (MTNL), but may not initiate its closure right away, as this would be done only after the company clears its liabilities of around Rs 32,000 crore, according to official sources.
To generate funds for expunging the liabilities, the company has been asked to generate revenues from asset monetisation and operations, and bring in efficiency to reduce costs, the sources added.
With little prospects of the revival of MTNL, the government is clear that the company will have to be wound up ultimately, most probably within a decade. But for this, all the liabilities need to be cleared and assets disposed of, the sources said, adding that this was the reason for not closing it down straightway.
Currently, the Central government owns a 56.25% stake in the state-run telecom operator, which provides services in Delhi and Mumbai. The public holds 43.75%, including 13.12% owned by Life Insurance Corporation of India (LIC).
The government had approved the first revival package for BSNL and MTNL in 2019. In 2022, it approved a second revival package for BSNL/MTNL amounting to Rs 1.64 lakh crore, where the share of MTNL is relatively less.
After the recent speculative spike in MTNL’s share price in the hope of the company being delisted, the stock has started to recede after the government indicated that there is no such plan. With the company having varied liabilities that are to be met, the shareholders won’t get anything in case of a closure, a senior official had earlier told FE.
In the last six months, the company has defaulted on bank loan payments worth Rs 1,600 crore. The company also has other liabilities such as AGR and spectrum dues to the government
“How do you close a company which has liabilities till 2034? To close, all liabilities have to be cleared and assets disposed of, which will take time. It is moving towards closure. It can’t be force-closed,” an official explained.
MTNL had issued sovereign guaranteed bonds worth Rs 24,000 crore, which has to be paid back to the bondholders by the government by 2034, as the company has little revenue.
As per a report submitted to the standing committee on communications and IT last year, it was claimed that MTNL has an asset base worth Rs 30,000 crore. However, sources said this may not be accurate.
In the meantime, MTNL is being pressured to identify assets and sort out titles by talking to the government of Maharashtra and Delhi for monetisation. A lot of MTNL properties in Delhi are on land provided by the Land and Development Office, with whom the company has to do revenue sharing in case of monetisation.
The company is trying to restructure loans with banks, which have an exposure of about Rs 8,000 crore. Even though talks are still on, banks are expected to give some relief by way of write-off and a longer window for the restructured loan amount.
“Total liabilities minus monetisation proceeds will be the hit to the taxpayers. The government has to see how much burden taxpayers can take,” the official quoted above said. Ruling out fresh capital infusion in the company, the official said the government can’t take all the burden, given the substantial public shareholding.
According to the department of telecom (DoT) officials, a resolution plan is in the works. The plan will include identifying new revenue streams for the company and improving its fibre-to-the-home (FTTH) services.
As of July end, the company has a base of 2.09 million wireline subscribers. Officials said the company’s employees have been given a mandate to improve FTTH services. As part of the restructuring, a majority of 3,000 employees of MTNL will also be moved to BSNL to reduce the financial burden on the former.
In the April-June quarter, MTNL’s net loss narrowed to Rs 773.5 crore from Rs 783 crore in the previous quarter. The company’s revenue from operations fell 12% sequentially and 8% year-on-year to Rs 183.9 crore in the quarter.
In FY24, the loss-making company had a finance cost of Rs 2,690 crore, way over its revenue of Rs 799 crore in the last financial year ended March.
For its mobile services in Delhi and Mumbai, the government recently approved a service agreement between BSNL and MTNL , wherein the former will manage the latter’s mobile services for a period of 10 years.
From: financialexpress
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