Why MTNL should shut shop

MTNL, which operates only in Delhi and Mumbai, lost its utility long back and the ideal solution is to close it down after giving a golden handshake to all employees, says Shyamal Majumdar.

Have you applied for a landline and broadband connection from Mahanagar Telephone Nigam Ltd (MTNL) recently? 

A friend, who lives in a rented apartment in Delhi did, and his experience shows how the state-owned company has remained frozen in time.

He reached the nearest MTNL branch at 4.30 pm on a Monday, filled up the application form as per instructions given overleaf, chose the broadband plan – the details of which were pasted on the office wall – and attached documentary proof of his residence address (public sector bank statement for three years) and identity (passport).

By the time he completed the paper work, he was told by the peon that the office has closed.

The peon was right - it was exactly a minute past the closing time of 5 pm. 

The experience was no better the next day, as the lady at the counter demanded a copy of the rent agreement and the latest electric bill in the landlord’s name.

My friend looked at the instructions yet again and there was no mention of such a requirement.

But the lady insisted that these were necessary to prevent “frauds”. The required documents were furnished in a couple of hours.

She now came up with fresh demands: before accepting the form, she asked him to go to Room No 101 and find out if the service he is looking for can be given in the area where he stays.

Room 101 wasn’t particularly helpful either.

After keeping him waiting for over half an hour, a gentleman there told him to come back the next day as the “lineman” concerned is not in.

Predictably, my friend dropped his plan to become an MTNL customer. 

My friend obviously isn’t alone as evident from the fact that MTNL’s market share in wireless has come down to 0.30 per cent and wireline to below 13 per cent at the end of March this year.

This, when the telecom firm has three and a half times more employees, with a twentieth of the revenue of Bharti Airtel, the top telecom operator.

For FY16, MTNL’s standalone net loss was over Rs 2,000 crore (Rs 20 billion), though the company claims it would be profitable in 2017-18.

It’s difficult to see how this would be possible as MTNL’s operating losses touched Rs 526 crore (Rs 5.26 billion) in the January-March quarter of 2015-16. 

It did make a net profit, but that was only because of refunds for surrendering CDMA spectrum. 

And, employee cost of MTNL is about 78 per cent of revenues against an industry average of three per cent. 

The severe financial problems have hurt MTNL where it matters the most. 

A report by the Standing Committee on Information Technology says during the last three years, MTNL has made very limited investment in network, affecting its ability to provide quality services. 

In 2014-15, for example, the listed company could offer 149,000 net new connections compared with the Budget estimate of 500,000 which was later revised to 250,000. 

But MTNL is still living in a state of denial. 

Responding to Heavy Industries Minister Anant Geete’s statement in Parliament that MTNL has been included in the list of 65 sick central public sector enterprises, an MTNL executive said it’s technically incorrect as the company had posted a profit of Rs 7,821 crore (Rs 78.21 billion) in 2013-14.

What he left unsaid was that the profit was on account of writeback of provisions on pension liabilities and spectrum amortisation costs of Rs 11,621 crore (Rs 116.21 billion). 

The government would thus make a terrible mistake if it doesn’t accept the Telecom Commission’s recommendation for a voluntary retirement scheme for employees who are 50 years of age and above.

MTNL has around 46,000 employees, of which 26,000 will be retiring in the next 10 years.

The VRS option would cover 20 per cent of its employees (about 5,300). Also, since nothing much can be done to improve the service quality, MTNL should also be forced to monetise existing assets by selling at least a part of its land bank, sharing of towers and optical fibre. 

Let’s face it. MTNL, which operates only in Delhi and Mumbai, lost its utility long back and the ideal solution is to close it down after giving a golden handshake to all employees.

Since the closure option is not feasible, the only course left is to set up a holding company, with Bharat Sanchar Nigam Ltd (BSNL) and a whittled-down MTNL as its subsidiaries so that there is seamless synergy in their operations.

That is easier to handle, as it will help avoid the cumbersome delisting route for MTNL.

Though BSNL itself is not out of the woods by any stretch of imagination, it still has a much better chance of survival because of its vast rural network of around 30,000 telephone exchanges and nearly 600,000 village public telephones. 

The debate on a merger of the two companies has gone on for more than 10 years now and fresh deadlines have been set for the umpteenth time.

The holding company concept, suggested by the Indian Institute of Management, Bangalore, looks the most feasible option at this stage.

Since any further delay would only mean further erosion of value, Telecom Minister Ravi Shankar Prasad could take a quick break from blaming the previous government, and take some concrete action.