Government Assures No Defaults on MTNL Bonds; Operations to Transfer to BSNL

The government has assured no defaults on MTNL's bond dues, with operations set to transfer to BSNL. Telecom Minister Jyotiraditya Scindia confirmed the state's support and asset monetization efforts to manage liabilities. A recent payment of Rs 92 crore towards bond dues was made to avert a crisis situation.

The government on Thursday assured that there will be no default on bond dues of MTNL and announced the transfer of the state-owned telco's operations to BSNL, while asset monetization efforts to pay off liabilities are underway.

Telecom Minister Jyotiraditya Scindia stated that the sovereign guarantee bonds will remain secure, emphasizing the government's backing. The Government of India’s support extends to the sovereign guarantee bonds, ensuring there will be no defaults.

Mahanagar Telephone Nigam Ltd (MTNL) is set to transfer its operations to BSNL, with asset monetization playing a key role in tackling its liabilities. Scindia assured that in the interim period, until asset monetization and bond dues are settled, the sovereign guarantee bonds will stand firm with the government's backing.

The statement came during a curtain-raiser for the India Mobile Congress 2024 event, scheduled for October. The government stepped in to make a critical Rs 92 crore payment towards MTNL's immediate bond dues, with an additional Rs 64 crore expected to be paid soon in interest obligations due in August.

This intervention is significant as it averts a potential financial crisis for MTNL, which has been struggling with debt obligations. Recently, the debt-ridden company had cited a lack of funds as the reason for its inability to make interest payments on certain bonds. The second semi-annual interest on specific bonds is due on July 20, 2024.

MTNL had stated in a recent BSE filing that due to the provisions of a Tripartite Agreement signed with the Department of Telecom and Beacon Trusteeship Ltd, and due to insufficient funds, it could not adequately fund the escrow account required for the interest payments.

The telecom provider, servicing Delhi and Mumbai, has witnessed a steady decline in its subscriber base over the years. It reported a loss of Rs 3,267.5 crore for the fiscal year 2024, up from Rs 2,915.1 crore the previous year. Revenue from operations for the year ending March 2024 fell to Rs 798.56 crore, a 14.6 per cent drop year-on-year.