The company had a net profit of Rs 21.30 crore for the July-September quarter last year, MTNL said in a statement.
"Staff cost has increased in comparison with the corresponding period last year on account of wage revision implemented and accounted for in Q4 of 2009-10 and thereafter," the company said.
Further, with reference to Q1 of 2010-11, the difference in arrears of wage revision of Rs 44 crore for 2008-09 and 2009-10 is also accounted for this quarter, it added.
Total income has also decreased to Rs 1,095.23 crore for the quarter ended September 30, from Rs 1,120.80 crore in the same period previous fiscal.
The company, which has paid a one-time charge of Rs 11,097.9 crore on account of 3G and BWA liability (over 15-20 years), has amortised Rs 157.6 crore for Q2 FY'11.
MTNL with 5.28 million subscribers, offers services in two circles -- Delhi and Mumbai as on December 31, 2010.
The company's scrip closed at Rs 69.60 on the BSE, down 1.28 per cent from the previous close.