The shares of PSU telecom MTNL surged over 6% in the early hours of trading today as investors cheered reports which stated that the government was considering shutting down MTNL and shifting its operations to BSNL.
As of March 2023, the government had plans to merge MTNL and BSNL to streamline the PSU telecoms operations and focus on profitability. However, reports suggest that the government is now planning to shut down the operations of MTNL entirely due to continuously growing losses.
Certain unnamed officials have stated that the decision to shut down MTNL was under "serious consideration" and "almost decided". According to plans, the company’s staff and operations would be transferred to BSNL while MTNL would be delisted from the exchanges and cease to exist.
The merger plan was discarded due to MTNL's high debt. The government telecom has high debt and growing losses that make it unfeasible to assist the company any further. If the two companies had merged, the revival of the merged entity would’ve been in jeopardy.
BSNL has seen some improvement recently as its revenues have grown to Rs 20,700 crores. Moreover, even though its losses grew proportionately, the company has repaid Rs 7,000 crores to its lenders. Furthermore, it is also the recipient of a Rs 1.64 lakh crore revival package and appears to be well on track for recovery.
The telecom’s performance has been steadily declining. In the last quarter of FY23, the company’s revenues fell 7.5% to Rs 202.35 crores while its losses widened 25% to Rs 745.78 crores. For FY23, the revenues of the company fell 13% while its consolidated net losses spiked 12% to Rs 2,910.74 crores. Moreover, the company had borrowings of over Rs 28,000 crores outstanding on its balance sheet in FY23.
The stock surged over 6% in early trading hours today as it touched a high of Rs 21.20 per share, up more than 6%, before sellers took the price back down. At the time of reporting, the stock was trading around Rs 20.00 per share, up 2.6%.
