India's MTNL has been recording losses for several years now and the government seems to have decided to shut down operations instead of merging with BSNL.

Gagandeep Kaur, Contributing Editor

June 9, 2023

3 Min Read
Is it the end of the road for India’s MTNL?
MNTL's demise was brought on by slow network upgrades, poor customer service and debt.(Source: Per Bengston/Alamy Stock Photo)

State-owned Indian service provider Mahanagar Telephone Nigam Ltd (MTNL) may be shut down and its employees and assets moved to another government-owned telco, Bharat Sanchar Nigam Ltd (BSNL), according to recent media reports.

Earlier, the government was planning to merge MTNL with the BSNL-BBNL combine – a merger of BSNL with Bharat Broadband Network Limited (BBNL) – that was announced last year. Its large debt may have led the government to shut down MTNL and not merge it with BSNL, since a massive debt could diminish BSNL's chances of recovery.

MTNL had an 8.14% market share in the wireline segment but just 0.21% in the wireless segment at the end of March 2023, according to TRAI data. /p>

The company has been reporting losses for several years now and has accumulated a massive debt of almost 235 billion Indian rupees (US$2.84 billion). MTNL first reported a loss in the financial year 2008-09 and has been reporting losses every year since, except in the 2013-14 financial year. MTNL is also listed on the New York Stock Exchange and will need to be delisted before it is shut down.

Bumpy ride

One of the key reasons for the debt is the high workforce costs carried by both the public sector undertaking (PSU) MTNL and BSNL. As of now, MTNL has 3,547 employees, but at one time it had a workforce of more than 20,000 for just two service areas. Almost 15,000 MTNL employees opted for the voluntary retirement scheme (VRS) in 2019. The government is likely to offer a VRS again now to bring down the number of employees and move the remaining staff to BSNL.

Further, MTNL, like BSNL, is yet to launch 4G, leading to significant churn and losses. MTNL operates in cities, where the lack of 4G services is a bigger issue because high-value subscribers and early adopters of new technology are typically from urban and Tier 1 areas.

Limited reach is also one of the key reasons for the demise of MTNL. It offers both fixed line and wireless services in the National Capital Region (including Delhi and adjoining areas of Faridabad, Gurgaon, Noida and Ghaziabad), Mumbai, Thane and New Mumbai. It has not been able to attract customers in the enterprise segment as they typically tend to opt for providers with pan-India operations.

MTNL has also been unable to compete with private telcos in terms of customer experience. Years of being the only service provider meant that the organization was not geared to satisfactorily address subscribers' problems.

MTNL was formed in 1986 to provide telephone services in the Delhi and Mumbai circles (service areas), while BSNL was formed to provide services in the entire country except for the two metropolitan cities. Together they were supposed to complement each other. However, as private players Essar and Bharti Cellular Limited (now Airtel) launched operations in 1995, the state-owned telcos started losing market share. Further, delays in launching 3G and 4G services in economic hubs sealed MTNL's fate.

It had a near monopoly in the landline segment for several years, even as the private players continued to gain ground in the wireless segment.

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— Gagandeep Kaur, Contributing Editor, special to Light Reading

About the Author(s)

Gagandeep Kaur

Contributing Editor

With more than a decade of experience, Gagandeep Kaur Sodhi has worked for the most prominent Indian communications industry publications including Dataquest, Business Standard, The Times of India, and Voice&Data, as well as for Light Reading. Delhi-based Kaur, who has knowledge of and covers a broad range of telecom industry developments, regularly interacts with the senior management of companies in India's telecom sector and has been directly responsible for delegate and speaker acquisition for prominent events such as Mobile Broadband Summit, 4G World India, and Next Generation Packet Transport Network.

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