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Institutions dial up MTNL on upbeat expectations
February 10, 2003 12:54 IST
MTNL is being propelled by expectations that the company's revenues will receive a substantial boost with the raising of fixed line rentals.
The stock of the state-run telecom services provider climbed 2.76% to Rs 109.65 by 11:30 IST. Over 495,000 MTNL shares changed hands on BSE by then.
In the five sessions between 31 January and 7 February 2003, MTNL dropped 10.8% to Rs 106.70 from Rs 119.70 on profit booking after a sustained rise.
In the five prior sessions between 24 and 31 January 2003, the scrip rose 47.7% from Rs 81.05, following sustained buying by institutions on hopes that the company's revenues may be boosted due to the recent hike in rentals for basic telephony services.
Currently, there's renewed buying from institutions (after the profit booking over the last few sessions) being witnessed on the counter. As per market talk, Salomon Smith Barney has been active on the MTNL counter.
There has been renewed interest in MTNL on hopes that the company's revenues may increase substantially after the Telecom Regulatory Authority of India announced on 25 January 2003, that monthly rentals for fixed line telephone services have been hiked by 11% to 12%. Trai also reduced call size (pulse rate) to two minutes from three minutes besides slashing free calls by half to 30. Also, the number of cheap calls was reduced by 40%. In effect, urban users making 500 calls a month, will now pay Rs 784 a month as compared to Rs 690 earlier. The hike in rentals will be effective from 1 April 2003.
This move on the part of the telecom regulator is expected to boost MTNL's revenues. Latest media reports suggest that the company's operating profit may rise by 30% following the Trai directive.
However, last week, MTNL reported that it has decided to offer alternate tariff packages to its subscribers of basic telecom services in Delhi and Mumbai. The company is working out alternate packages and will be approaching the Trai soon. The alternate tariff packages is aimed at offering value additions and increase the usage by MTNL's subscribers in the face of aggressive competition from private players. The alternate packages will be offered besides the standard tariff package announced by the telecom regulator in January 2003 - which has increased the monthly rental in the two metros to Rs 280 from the existing Rs 250 while curtailing free calls from 30 to 60. Trai's new tariffs will come into effect from 1 April 2003
MTNL is engaged in basic telephony services in the two metros of Mumbai and Delhi. It also offers Internet and cellular services.
Meanwhile, there were reports that the divestment in MTNL will be undertaken before the stipulated time. Earlier, the government had said that MTNL's privatisation was not likely to take place before FY 2003-04. The Government of India holds 56.25% of the total equity capital of Rs 630 crore (Rs 6.3 billion) of MTNL, while institutions and the public hold 40% and 2% respectively.
There were also reports that Arun Shourie, the new Communications Minister, will study the controversial proposal to merge state-run telecom giants MTNL and Bharat Sanchar Nigam. Shourie, who is also Disinvestment Minister, replaced Pramod Mahajan as Communications Minister week before last. Mahajan was said to have favoured a merger between listed MTNL and unlisted BSNL.
Dealers say the new minister wants competition in the telecom sector and is, therefore, not likely to approve the merger of the two state-run telecommunications service providers.
On 23 January 2003, MTNL announced dismal Q3 (ended 31 December 2002) results - a drop in net profit of 33.8% to Rs 217.06 crore (Rs 2.17 billion) as compared to Rs 328.01 crore (Rs 3.28 billion) in the corresponding period of the previous year. Net sales decreased by 11.33% to Rs 1,463.15 crore (Rs 14.63 billion) from Rs 1,650.11 crore (Rs 16.5 billion) in DQ 2001.
BSE Code: 500108
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