Mahanagar Telephone Nigam Limited (MTNL), the smaller of the two state-owned telecom companies carved out of the Department of Telecom, is likely to wind up, according to an exclusive Mint report. Its employees and assets are likely to be handed over to the surviving state-owned telco, BSNL. Apart from MTNL unions and Left intellectuals, whose hearts break every time a state-owned enterprise is shut down, few are likely to shed tears at the belated end of this company, reeling under the burden of accumulated losses for some time. more instead of 23,000 crore debt.
MTNL will become the first state-owned enterprise to shutter after being outbid by more nimble private sector rivals (others, such as Air India, were sold rather than closed). In steel, state-owned SAIL and RINL are still alive despite all odds of being run by boards on which government nominees pursue goals that are not about corporate efficiency, and degrees of independence. Employees who enjoy having to deal with unions that are their private sector do not equate. In power, state-owned NTPC thrives, and not just because it is profitable; Private companies will not have to pay by state level electricity distributors.
Telecom was an area of focus for Rajiv Gandhi after becoming Prime Minister in 1984. The government established the Center for the Development of Telematics (CDOT), which developed electronic exchanges for the first time in India. In 1986, two companies were carved out of the Department of Telecommunications – MTNL and Videsh Sanchar Nigam Limited (VSNL). MTNL deployed electronic exchanges, introduced technological innovations such as ISDN, which allowed voice and data signals to travel over the same network, introduced Internet services and was listed on the New York Stock Exchange in 2001.
Telephony was opened to the private sector in 1994. The Delhi and Mumbai circles were given to Bharti Airtel and Essar on nomination basis. Bids were invited for other circles. The companies overbid, drove out potential competitors who had bid more rationally, and then failed to meet revenue targets and pay license fees. He lobbied the government to change the license-fee regime to revenue-sharing.
In 2000, telecommunication services provided by the Department of Telecommunications outside the MTNL service area of Mumbai and the National Capital Region were brought under a new corporation, Bharat Sanchar Nigam Limited. This was a major political achievement by the then Telecom Minister Ram Vilas Paswan, who overcame strong union opposition by offering free phone connections and free calls to every employee.
By then, Reliance had started its own mobile telecom service, initially abusing its license for limited mobility service (for a fixed line phone to move around the house), to offer full mobility. , took advantage of the technology’s ability to deploy for limited mobility. Whether the service was regularized after it paid the entry fee and penalty charged by other telecom players. This changed the telecom business in India from a low-volume, high-margin business to a low-margin, ultra-high-volume business, which made all private telcos highly profitable. But MTNL remained a struggler.
In 2008, MTNL’s share price was still in triple digits. It soon went below that and has been falling ever since, now giving the company a beating Vodafone-Idea shares.
MTNL lacked the managerial agility to compete with private operators and its large army of employees was paid several times what private telecom companies paid their employees performing similar services. As MTNL’s customers ported to other service providers, its business shrank to unviable levels.
The closure of the company is justified. It does not serve any social purpose which is not better served by private telecom service providers. Nevertheless, MTNL has some of the best technical brains and expertise, which the government would be foolish to let go of.
Cyber security is now an existential concern for the security of the state, financial infrastructure and personal integrity. To deal with this menace, the government needs new agencies to research, formulate strategies and implement them. The technical capability of MTNL engineers will be of use to the government in this context.
Another development is the emergence of cyber and space capabilities as an integral part of the country’s strategic capabilities. Both the US and China have integrated space and cyber capabilities in their armed forces. India also needs to do the same and MTNL engineers can work in this area as well.
Even if MTNL fades away as a company, its brains can be transplanted to vital parts of the country’s security establishment. This will redeem the commercial failure of the company to some extent.
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Updated: June 07, 2023, 01:01 PM IST