In today’s Finshots, we tell you why MTNL’s rescue is stuck in a limbo and how it could end up hurting Indian banks, and you.

The Story

1986. That’s when it all began. The government launched Mahanagar Telephone Nigam Limited (MTNL) to improve telecom services in India’s two biggest cities ― Mumbai and Delhi. For a while, it thrived, with a monopoly on landlines and even becoming India’s first telco to launch 3G in 2008. But the good days didn’t last.

Private players like Airtel and Vodafone entered with faster networks and better service. And when Jio landed with rock-bottom prices and high-speed data, the game changed completely.

But MTNL? It stayed stuck. We say that because while telcos were rolling out 4G and preparing for 5G, MTNL was still figuring out 3G. Even today, its 4G rollout is barely visible despite government backing and BSNL’s support.

And that’s just one part of the problem.

Because in telecom, once subscribers start fleeing for better services, it’s hard to win them back. And that’s what happened with MTNL.

Today, it has only 5.2% of India’s wireline subscribers and a measly 0.1% share in wireless. And with less business, MTNL started bleeding tons of cash. Revenue fell from ₹3,000 crores in 2015 to about ₹800 crores in 2024. Losses, meanwhile, remained firmly in four digits — from ₹2,900 crores in 2015 to ₹3,200 crores in 2024. And because it kept issuing bonds with government guarantees as well as getting loans from banks to run its operations, interest costs just kept going up too.

Then it had another issue ― people. Too many of them. With an ageing workforce, MTNL had massive salary and pension bills. It had more employees per customer than any other telco. So while revenues fell, costs didn’t.

The writing was on the wall.

But since MTNL is a public sector company, the government tried to save it. In 2019, it announced a ₹69,000 crore revival plan — including a merger with BSNL, free 4G spectrum, and a voluntary retirement scheme (VRS) to cut employee costs. Nearly 14,000 employees took the VRS, and MTNL’s staff strength dropped by over 90%.

But it didn’t work. Revenues kept shrinking. The 4G spectrum remained unused and 4G services never took off.

So the government kept writing cheques — ₹1.64 lakh crores in a second revival plan, ₹89,047 crore more after that, and most recently, ₹6,000 crores. That’s over ₹3.2 lakh crore just to keep MTNL and BSNL running.

Now to be fair, the revival money went to BSNL as well — the larger of the two. But MTNL is barely operational. BSNL now runs MTNL’s operations under a service arrangement. Meaning, BSNL has temporarily taken over MTNL’s operations to assess the risks involved without committing to a full merger. So MTNL is, for all practical purposes, a shell.

That’s still its own headache and it’s a massive one.

Allow us to explain.

As of March 2025, MTNL owes ₹33,500 crores including bank loans, sovereign guaranteed (government guaranteed) bonds and dues to the Department of Telecom (DoT).

And as you may have guessed already, it has defaulted on its bank loan repayments.

Banks have now declared MTNL a non-performing asset (NPA) — a sign that repayment might not come back easily, soon or ever. They’ve even formed a group to recover what they can. But here’s the problem. Dragging a government owned company like MTNL to insolvency court isn’t exactly a walk in the park. Technically, there’s nothing that can stop banks from doing it. But in practice, PSUs rarely end up there. And now, the government has stepped in and asked lenders to hold off on that option for the time being, at least.

So banks are stuck. Their other options? Wait. Or take a haircut. And MTNL has proposed to repay just 40% of what it owes, which is a 60% haircut!

The banks obviously aren’t thrilled and they’ve countered with a 20% haircut instead. But even that’s uncertain as MTNL makes less money in a year than it loses in a single quarter.

So where does that leave us?

Well, the government hasn’t announced a new bailout. No fresh cash. No winding it down either. It’s letting MTNL fade away, while BSNL keeps things going on the ground.

But taxpayers? They’re still footing the bill.

You see, when the government guaranteed MTNL’s bonds, it effectively signed a blank cheque. If MTNL can’t repay, the government must. And that means your taxes fund the debt and interest payments.

If the bank loans are written off, the pain shifts to banks. That could mean lower profits, higher provisions, and the need for fresh capital. And guess who funds that capital? Again — the government. Again — your money.

This isn’t a one-off either. Just a couple of years ago, the government had to take over Air India’s debt before selling it. Then there’s the ₹3 lakh crore+ infused into PSU banks since 2015 to clean up bad loans. Or the crores of liabilities sitting on NHAI’s books.

MTNL is just another entry on that growing list.

And what has MTNL done so far? Nothing much to be honest. It has tried selling assets to reduce debt — mostly land, buildings, towers and it has raised just about ₹2,100 crores through it.

So now, things are in a weird limbo. Because MTNL doesn’t serve many customers. Doesn’t have viable revenue. Doesn’t launch new tech. And doesn’t get shut down either. It just… exists.

In fact, MTNL agrees that it just can’t compete with the way things are today. It said in its report…

The existing network of MTNL has become obsolete. The heavy debt burden and the recurring losses during the past 12 years have resulted in a financial crunch, making MTNL unable to invest in the modernisation, upgradation and expansion of its network.

And the strangest part is that despite all this, MTNL’s shareholders keep rising. Maybe investors think the government will eventually merge MTNL with BSNL. Or sell its land. Or privatise it. Maybe they believe something — anything — will happen to unlock value.

But the fundamentals don’t back that up. MTNL has a poor debt servicing ratio. It’s fundamentally insolvent. Its revenue is tiny. And its liabilities are massive.

The bigger picture, however, is that this isn’t just about one PSU. It’s about how PSUs can quietly burn money without anyone noticing. Until it hits the banks or the Budget.

The government has said that MTNL won’t be shut down until its liabilities are cleared. But here’s the problem — MTNL issued sovereign-guaranteed bonds worth ₹24,000 crores, and those mature only in 2034. Which means banks will have to wait for years and MTNL might need more asset sales or even another fund infusion. And every delay adds more interest cost.

So yeah, it’s a vicious cycle.

And the government knows this too. There’s already talk that MTNL could be wound down in the next decade.

Which makes us ask — why keep reviving something that has clearly run its course?

It doesn’t serve the public well. It burns taxpayer money. And it adds stress to an already stretched banking system.

The truth is, we’ve seen this story before.

We’ve kept pouring money into entities that lost their edge years ago, hoping they’d turn around. But maybe it’s time to accept that not every revival is worth it.

Because when MTNL finally winds up, it won’t look anything like the company that once ruled India’s telecom space. And maybe that’s the only way forward.

Until then…

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