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Institutions find MTNL a good number
February 20, 2003 15:12 IST
MTNL has aroused considerable interest as the market expects the government to hike foreign equity cap in basic and mobile service providers to 79%.
As a result, the scrip of the telco climbed 3.17% to Rs 110.75 by 12:10 IST. Volumes in MTNL on BSE stood at over 728,000 shares around that time.
In the 12 sessions between 31 January and 19 February 2003, MTNL dropped 10.3% to Rs 107.35 from Rs 119.70 on profit booking . In the five 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.
Thursday's rise in the scrip is also attributed to domestic and foreign institutional buying. As per market talk, Prudential ICICI is mopping up the shares of MTNL.
There are reports now that MTNL's privatisation plan may take place sooner than expected. Earlier, the government had said that MTNL's privatisation was not likely to take place in FY 2003-04. The Government of India holds 56.25% of the total equity capital of Rs 630 crore (Rs 6.3 billion) in MTNL, while institutions and the public hold 40% and 2% respectively.
Meanwhile, interest in the stock has also manifested on reports that the government may raise foreign equity ceiling for basic telecom and mobile services to 74% from the current 49%.
Of late, there has been sustained interest in MTNL on hopes that the company's revenues may increase substantially after the Telecom Regulatory Authority of India, on 25 January 2003, hiked monthly rentals for fixed line telephone services 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.
Latest media reports suggest that the company's operating profit may rise by 30% following the Trai directive.
MTNL recently 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 are aimed at offering value additions and increasing 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 (Delhi and Mumbai) to Rs 280 from the existing Rs 250 while curtailing free calls from 30 to 60.
MTNL is engaged in basic telephony services in the two metros of Mumbai and Delhi. It also offers Internet and cellular services.
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.
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