MTNL's counter rings with gains

MTNL proved the biggest gainer in the Sensex in mid-morning trades on Wednesday, encouraged by the revised rentals for land lines.

Foreign institutional investors as well as punters were active on the counter of the telecom service provider, taking it soaring up 14.62% to Rs 104.65. Relatively high volumes of over 1.93 million shares were registered on BSE so far.

In three sessions (including Wednesday), Mahanagar Telephone Nigam has jumped over 29% from Rs 81.05 on 24 January 2003.

The current euphoria in MTNL has emerged ever since Trai increased monthly rentals, expected to boost MTNL's revenues. MTNL is a major player in urban telecom service. Latest media reports suggest that the company's operating profit should rise 30% with the Trai directive. MTNL is engaged in basic telephony services in the two metros of Mumbai and Delhi. It also offers Internet and cellular services.

Other telecom service providers like Bharti Tele- Ventures (up 8.52% to Rs 29.30) and Hughes Tele.com (up 2.52% to Rs 6.10) have also received a shot in the arm with the Trai revision.

On 25 January 2003, the Telecom Regulatory Authority of India announced that monthly rentals for fixed line telephones would be hiked 11 to 12%. Trai has 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 has been reduced 40%. In effect, urban users making 500 calls a month, will now pay Rs 784 a month as compared to Rs 690 earlier. Hiked rentals will be effective from 1 April 2003.

Trai, however, has not hiked rentals for the rural subscriber. The number of free calls and duration of a call have been reduced by one-third. The number of cheap calls have been cut by 40% except that they pay 80 paise for the first 300 calls, where the urban users pay just Re 1. Rentals for senior citizens have been kept constant.

Trai has also announced that all incoming calls will be free. Calls from a fixed line to a cell phone will cost more. While in metros, it will be 80 paise per minute, in other cities, it will be Rs 1.20 a minute. The call rates of limited mobility phones are likely to go up as WLL operators will have to pay terminating charges of between 30 paise to 60 paise a minute to call terminating network. Leaving the tariffs of limited mobility phones and international long distance to competition, the regulator has put a ceiling of Rs 8.40 a minute on national long distance calls.

Meanwhile, dealers say punters are also active on the MTNL counter following reports that Arun Jaitley is expected to take over from Pramod Mahajan as the IT and telecommunications minister. They say the market is punting on MTNL following hopes that with the change in ministership the disinvestment of MTNL will catch pace and will be undertaken before the stipulated time frame. Earlier, the government had said that MTNL's disinvestment was not likely before FY 2003-04.

The Government of India holds 56.25% of the total equity capital of Rs 630 crore in MTNL, while institutions and the public hold 40% and 2%, respectively.

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) 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. The company was expected to, according to a capitalmarket.com poll of six telecom analysts, come up with a net profit of Rs 265.5 crore (Rs 2.65 billion) to Rs 301 crore (Rs 3.01 billion) and net sales of between Rs 1,476.5 crore (Rs 14.76 billion) and Rs 1,525 crore (Rs 15.25 billion).

BSE Code: 500108