In Short:
The board of Mahanagar Telephone Nigam Limited (MTNL) has approved a 10-year service agreement with Bharat Sanchar Nigam Limited (BSNL). This move aims to strengthen their operations, but both companies face challenges competing with private telecoms due to outdated technology. Additionally, MTNL plans to sell shares in some subsidiaries and will close down its subsidiary, Millennium Telecom Limited.
Mahanagar Telephone Nigam Limited (MTNL) has secured approval from its board for a 10-year service agreement with the government-owned Bharat Sanchar Nigam Limited (BSNL). This decision was announced in a regulatory filing on Wednesday, following the conclusion of the board meeting.
Details of the Agreement
The service agreement will last for ten years unless revoked with a six-month notice period or extended by mutual consent of both parties. The agreement is subject to approval by the Department of Telecommunications (DoT) and the Ministry of Company Affairs (MCA).
Operational Context
Currently, MTNL operates within Delhi and Mumbai, while BSNL services the remaining parts of the country. Both organizations have struggled to compete against private telecom operators, primarily due to their inability to offer 4G and 5G services, resulting in a continual decline in subscribers.
Government Proposals
The government previously suggested a merger between the two state-run telecom public sector undertakings (PSUs); however, this proposal was postponed due to the significant debt levels faced by MTNL.
Additional Approvals by MTNL Board
In addition to approving the service agreement, the MTNL board has also sanctioned the sale of its shares in Mahanagar Telephone (Mauritius) Ltd (MTML), ensuring compliance with applicable guidelines established by Department of Investment and Public Asset Management (DIPAM), as well as the relevant processes governed by the Securities and Exchange Board of India (SEBI) and company laws.
Moreover, the board approved the sale of shares in MTNL STPI IT Services Ltd (MSITS), adhering to the joint venture contract with Software Technology Parks of India (STPI) and all necessary regulatory guidelines.
Closure of Millennium Telecom Limited
Lastly, the board has endorsed the proposal to close Millennium Telecom Limited (MTL), another wholly-owned subsidiary of MTNL, in compliance with applicable regulations and due processes as stipulated by DIPAM and SEBI.
