Mahanagar Telephone Nigam Ltd (MTNL), the state-run telecom company, has recently disclosed a default on principal and interest payments totaling Rs 87.34 billion to various public sector banks. This latest default highlights the telecom firm’s escalating financial distress amid fierce competition and shrinking market relevance. The defaults have further strained MTNL’s already heavy debt burden and cast fresh doubts on its operational viability without strong government support.
Overview of the Default
MTNL has defaulted on Rs 87.34 billion (Rs 8,734 crore) in principal and interest payments owed to a consortium of seven public sector banks including Union Bank of India, Bank of India, Punjab National Bank, and State Bank of India.
The amount comprises Rs 77.94 billion in overdue principal and Rs 8.65 billion in unpaid interest, as per disclosures in August 2025.
This fresh default follows previous reports in July 2025, when MTNL had already disclosed loan defaults amounting to Rs 85.85 billion to the same group of banks.
Debt Profile and Financial Stress
MTNL’s total debt as of July 31, 2025, has escalated to Rs 345.77 billion (Rs 34,577 crore), including sovereign-guaranteed bonds and loans from India’s Department of Telecommunications (DoT).
The company’s debt comprises roughly Rs 87 billion in bank loans, Rs 240 billion in sovereign-guaranteed bonds, and Rs 1,921 crore from DoT loans specifically for bond interest payments.
Despite ongoing government support and debt restructuring efforts, MTNL remains burdened by mounting losses, declining subscribers, and shrinking market share in the highly competitive telecom sector.
Impact on Banks and Creditors
The banks exposed to MTNL’s default include seven major public sector banks, with Union Bank of India holding the largest outstanding exposure of approximately Rs 37.7 billion (Rs 3,770 crore).
Other banks affected include Indian Overseas Bank, Bank of India, Punjab National Bank, State Bank of India, UCO Bank, and Punjab and Sind Bank.
The repeated defaults have translated into non-performing assets (NPAs) for these banks, exacerbating credit risks in the banking sector’s telecom exposure.
Operational Challenges and Market Context
MTNL has been struggling with a significant subscriber base erosion due to intense competition from private telecom operators.
The company’s financial losses have widened in recent years, with its latest quarterly profit after tax (PAT) figures showing severe negative growth.
The telecom operator’s relevance has decreased amidst faster technology adoption by competitors, making it difficult for MTNL to sustain revenues or repay debts without ongoing government intervention.
Regulatory and Market Reaction
MTNL’s disclosures on defaults have affected investor sentiment, reflected in its stock price fluctuations, which hovered around Rs 44-45 in early September 2025.
The company has publicly communicated these defaults through various letters and filings to stock exchanges and concerned banks over the past year, indicating attempts to manage creditor relations.
Financial analysts remain cautious about the company’s ability to turnaround without significant recapitalization or restructure, given the scale of debt and competitive pressures.
Conclusion:
MTNL’s default on Rs 87.34 billion in principal and interest payments worsens its financial crisis, underscoring ongoing challenges for government-run telecom entities in India’s evolving market. With an overwhelming debt load and persistent losses, the state-run operator’s future hinges on robust government backing or major strategic changes to revive its fortunes.
Sources: Reuters, Moneycontrol, Economic Times Telecom Section
