MTNL: Time To Pull The Plug

A few years ago, while moving homes in central Mumbai, I tried to get my state-owned telecom company Mahanagar Telephone Nigam Limited’s (MTNL) landline transferred to the new residence.

After all, the previous number had been in service for several years, was known to many and had largely worked fine. It took several days of calling and visiting, including by a persistent office boy to establish that MTNL had no cables in the area in question.

In one call to the telephone exchange, an Assistant Engineer picked up the phone and helpfully asked me if I was okay with a fibre connection for the internet. Sure, I said. And then the engineer was not to be found. In retrospect, I felt he had picked up the phone accidentally.

It finally emerged that there was never any prospect of a new MTNL cable in that area, at least to the apartment complex I was moving into. In frustration and with some sadness, I surrendered the phone line, which by the way is a term that is quite unique to the Indian telephone system.

Unmasking MTNL's Downfall

MTNL’s travails are not new, the company which runs telephone operations in Mumbai and Delhi has been on a death spiral for more than two decades. More than a decade ago, a colleague told me that once he visited a telephone exchange in central Mumbai and was shocked to see that the line to return or surrender the phone was much longer than the one where people were applying for new connections.

That was my first anecdotal but real warning sign. While the explosive growth of mobile phones has obviously edged out the likes of Government-owned MTNL and Bharat Sanchar Nigam Limited (BSNL) over the years, these companies also completely lost out on the fibre opportunity for data-cum-voice. These markets were completely captured by the likes of Reliance, Airtel and Tata.

Reports say MTNL has now failed to repay a Rs 1,000 crore loan from Bank of India which in turn has affected the bank’s second quarter financial results thanks to a Rs 200 crore provision. It is highly unlikely this money will ever materialise unless of course MTNL is liquidated or unless assets are sold to repay loans.

MTNL’s total debt is around Rs 31,944 crore, including Rs 7,873.52 crore owed to various banks and financial institutions, reports suggest. Losses were over Rs 3,300 crore. The current revenue run rate seems to be less than Rs 800 crore and that too on a slowing trot. MTNL is a listed company and quite likely its best asset is prime real estate, already being put to good use by leasing out to other, mostly Government organisations.

Air India’s sale to Tatas, despite it being done at a much-delayed stage when the airline was on life support systems, was a good step and demonstration of the Government’s intent to not be in the business of doing business, particularly consumer-facing ventures like airlines.

The Heavy Price Taxpayers Pay

The last few years have seen some public sector enterprises do well, both in terms of balance sheets and in the stock markets. Despite those successes, failures like MTNL stand out like sore thumbs.

A private company that fails to repay Rs 1,000 crore and is in a similar financial condition would have been visited by multiple tax and enforcement agencies by now. It would appear that because it is government-owned, a company like MTNL is getting a pass.

There is no real deadline or sunset date for resolution or closure, for example.

Quite possibly, the government and the Department of Telecom, under whose jurisdiction this falls, have been attempting various methods to resuscitate MTNL. But clearly, those efforts have been in vain. This also raises the issue of who is accountable for rising losses, falling revenue, and the increasing interest burden of unpaid loans.

Quite likely, no employee or official of the company is under any real pressure, and possibly, they could do little even if there were. This, of course, is the case in any state-owned organization where responsibility is diffused at best, particularly when the stakes are down. The government has made it amply clear, in actions if not in words, that it wants to be in the business of doing business.

Debating this point might be futile. But the government is accountable for taxpayers' money propping up lifeless enterprises that have no present or future role in our lives. There must be immediate efforts to liquidate the company, dispose of the assets, and return the money to shareholders, which includes the government, too. And there should be a deadline to do so that is publicly shared.

Taxpayers have a right to hold the government accountable for how our taxes are used in state-owned and run organizations even as they are taking their last and dying breaths.