A lender's warning

State Bank of India's notice to MTNL presents an opportunity to change the telephone company's ownership

- A K BHATTACHARYA

Last week, Mahanagar Telephone Nigam Limited (MTNL) was in the news. India's largest bank, State Bank of India (SBI), informed MTNL that its loan account, with a total debt of ₹325 crore, had become a non-performing asset (NPA). Both the instalment repayment and interest payment under this account had become overdue after June 30 this year. Since the overdue amount remained uncleared for more than 90 days, SBI classified the loan account as sub-standard. It also warned MTNL that failure to make immediate payment of the overdue sums would lead to the levy of a penal interest rate on the outstanding balance.

Set up in 1986 as a public sector undertaking (PSU), MTNL began its operations in Delhi and Mumbai, providing telecommunication services in these two large metropolises. In 1997, it became a Navaratna company (among a dozen-odd large PSUs enjoying relative investment freedom), followed by its disinvestment (which over time would reduce the government's equity in it to 56 per cent) and listing on stock exchanges in India in 1998 and on the New York Stock Exchange in 2001. However, this was also the time when India's telecom sector was thrown open to competition from the private sector. A state-controlled enterprise failed to withstand that competition and began losing market share to the new private sector players. With the growth in mobile telephony far surpassing that of landline connections and MTNL failing to ramp up its mobile services, its market share in both wireless and landline services dropped to less than half a per cent and seven per cent, respectively, by the end of 2023.