Buyers are cheering one more authorities intervention to maintain the struggling state-owned telecom operator afloat. However beneath the short-term optimism lies a deeper disaster: mounting debt, a shrinking market share, and a legacy of economic mismanagement that has left MTNL on life help.
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This isn’t the primary time a bailout has sparked a fleeting inventory surge, solely to be adopted by a harsh actuality verify. As India’s telecom sector consolidates, non-public gamers are elevating tariffs and strengthening profitability, whereas Bharat Sanchar Nigam Ltd (BSNL) and MTNL stay depending on authorities lifelines.
Now, with the most recent asset monetization plan in movement, the query stays—will this lastly break MTNL’s cycle of decline, or is it simply one other short-term repair?
A legacy of decline
MTNL, a subsidiary of BSNL, is weighed down by a ₹32,000 crore debt burden, the results of 15 years of steady losses. The disaster has deepened to the purpose of mortgage defaults, with ₹7,000 crore owed to lenders akin to Union Financial institution of India, State Financial institution of India, and Punjab Nationwide Financial institution now categorized as defaults.
As soon as a dominant power in Indian telecom, MTNL thrived within the Nineties as the only supplier of phone companies. However the sector’s liberalization underneath the Nationwide Telecom Insurance policies of 1994 and 1999 opened the doorways to personal gamers like Bharti Airtel and Thought Mobile (now Vodafone Thought), who swiftly eroded MTNL’s market share.
By FY09, MTNL’s market share had dropped to 11%, and its incapacity to chop workforce prices—a privilege of its government-backed construction—accelerated its decline.
As revenues dwindled, MTNL relied on debt to remain afloat, triggering a vicious cycle: rising curiosity prices deepened losses, limiting its capacity to spend money on new applied sciences. By late 2024, its market share had collapsed to simply 0.2%, forcing a merger with its mother or father, BSNL. However with BSNL itself lagging in 4G adoption, the merger did little to deal with MTNL’s elementary issues—it was extra of a stopgap than an answer.
Market disruption and AGR dispute: A double blow
In 1999, India’s telecom sector transitioned from a hard and fast licensing charge mannequin to a revenue-sharing system for spectrum dues to the DoT, whereas captive telecom gamers continued underneath the fixed-fee mannequin.
A key level of rivalry emerged across the Adjusted Gross Income (AGR) definition. Personal telecom operators argued that AGR ought to embrace solely core telecom revenues, whereas the DoT insisted it ought to embody all revenues. The dispute dragged on for over a decade till 2019, when the Supreme Court docket upheld the DoT’s definition, triggering a further ₹1.2 trillion in spectrum dues for telecom gamers. This sudden monetary burden compelled operators to tackle extra debt, slowing investments and intensifying monetary pressure.
In the meantime, Reliance Jio’s 2016 market entry additional upended the trade. By providing aggressively priced companies, Jio lured away subscribers, squeezing incumbents’ revenues simply as they have been grappling with ballooning AGR-related liabilities. The consequence was a brutal shakeout—cash-rich gamers absorbed the hit and survived, whereas weaker ones folded. Market consolidation adopted, and the federal government’s aid measures, together with eradicating the three% flooring on spectrum utilization expenses and waivers for spectrum acquired post-July 2022, helped stabilize margins for the survivors.
With the turbulence of market disruption and AGR dues largely behind them, telecom gamers have now pivoted towards profitability. Business leaders Reliance Jio and Bharti Airtel have been steadily climbing tariffs every quarter, capitalizing on a extra steady aggressive panorama.
In opposition to this backdrop, BSNL and MTNL have taken a unique route, retaining tariffs unchanged. This has helped appeal to price-sensitive subscribers, permitting BSNL to regain market share slowly.
Nevertheless, after shrinking from 25% in FY09 to simply 8% at the moment, BSNL had formidable plans to reclaim misplaced floor in 2025. But, delays within the ‘India Stack’ 4G/5G rollouts and protracted service high quality points have stalled its comeback, casting doubt on these lofty targets.
With a ₹3.2 trillion revival bundle, BSNL has launched 4G companies and is trialing 5G. The newest price range earmarked ₹83,000 crore for BSNL’s tech upgrades and restructuring.
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However monetary assist can solely achieve this a lot when losses persist and debt retains mounting—MTNL’s obligations have surged from ₹10,000 crore in FY04 (comprising primarily of present liabilities) to virtually ₹35,000 crore in FY24, with long-term debt of about ₹25,000 crore.
Déjà vu—However will this time be completely different?
MTNL’s latest 25% inventory rally appears like a repeat of July 2024, when its share worth surged 150%.
Again then, buyers panicked over looming bond curiosity funds—simply as they’re now over financial institution mortgage defaults. And identical to at the moment, the federal government stepped in with monetary assist, protecting ₹92 crore in fast bond curiosity, briefly reviving investor confidence and pushing the inventory from ₹40 to almost ₹100.
However as soon as the bailout euphoria pale, deeper considerations—dwindling market share, falling revenues, and mounting debt—dragged the inventory again right down to ₹40 by year-end.
This time, the federal government is taking a broader method. As a part of its ₹10 trillion asset monetization plan (2025-30), the long-awaited sale of MTNL’s belongings was confirmed by DIPAM’s secretary. The proceeds—anticipated to complete ₹16,000 crore—will go towards debt compensation and restructuring.
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Not like previous interventions, this isn’t only a stopgap measure to cowl fast dues. If executed as deliberate, the monetization may almost halve MTNL’s debt, which stood at ₹31,945 crore as of August 2024. Nevertheless, delays in regulatory approvals and uncertainty across the closing valuation stay vital dangers.
Conclusion
After all, even when annual interest-costs halve to about Rs1,300 crore, on the present run-rate of Rs160 crore quarterly revenues (Q2 FY25), with annual revenues of lower than ₹700 crore, MTNL will nonetheless be making losses. As such, monetary restructuring alone received’t be sufficient—it wants an actual aggressive edge.
Authorities-backed initiatives like Bharat Web could present a brief enhance. Nonetheless, with out aggressive investments in spectrum infrastructure, service high quality, and buyer retention, MTNL will stay a shadow of its former self.
Additionally learn | MTNL is broke. However that’s not its largest downside.
The newest bailout buys time, however time alone received’t flip the enterprise round. Except MTNL breaks its reliance on authorities help and charts a transparent development technique, its battle in opposition to non-public telecom giants could once more finish in a well-known trend—with one other cycle of decline, intervention, and fleeting hope.
Ananya Roy is the founding father of Credibull Capital, a Sebi-registered funding adviser. X: @ananyaroycfa
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