Government may hand over MTNL operations to BSNL and not merge them

The government may hand over operations instead of merging MTNL with BSNL as a merger would involve de-listing MTNL, which means a share buyback is necessary.

The government is considering to just hand over operations of the public sector telecom operator MTNL to the bigger BSNL instead of merging the two, Times of India reported, citing unidentified sources.

Why is the government handing over MTNL operations to BSNL?

Handing over debt-laden MTNL's operations to Bharat Sanchar Nigam Ltd (BSNL) through an agreement is being looked into (Reuters)

Both MTNL and BSNL have struggled financially in the past and have received bailouts even as recently around two years back.

The government is considering handing over operations rather than a merger because a merger would involve de-listing MTNL, which means that the government would have to buy back a certain number of shares, according to the Times of India report.

How are MTNL's financials like?

MTNL reported an increased loss of ₹3,303 crore in the financial year 2023-24, compared to ₹2,911 crore during the previous year. The company's revenue dropped 15% to ₹728 crore from ₹862 crore last year.

MTNL's debts also increased to ₹25,795 crore from ₹23,500 crore a year back. The company this week announced in a regulatory filing that it is unable to make interest payment to certain bondholders “due to insufficient funds,” PTI reported.

The final decision on the matter is likely to be taken in a month's time, according to the PTI report.

Though the subscriber base for private telecom operators like Reliance Jio and Bharti Airtel have grown over the years, MTNL has seen its customer base fall from just around 4.66 million users in January-March 2023 to 4.1 million users in this year.

MTNL offers services just in Delhi and Mumbai, but BSNL offers pan-India services except for Delhi and Mumbai.