MTNL’s plans to seek approval of shareholders for raising authorised share capital to Rs 10,000 crore and borrowing powers by almost 40 per cent will aid the state-owned corporation’s 4G plans and provide it the firepower to compete in the market, its chairman P K Purwar has said. Also Read - Jio Platforms: Qualcomm Ventures follows Intel Capital to invest Rs 730 crore for a 0.15 percent stake
At a time when the sector that has seen shuffling of the top deck with the recent completion of Vodafone and Idea Cellular merger, Mahanagar Telephone Nigam Ltd (MTNL) has lined up an annual general meeting on September 28 to raise the authorised share capital to Rs 10,000 crores from Rs 800 crores, as an enabling provision. Also Read - Sony WF-XB700 true wireless earphones review: Punchy sound, solid battery life
It has also sought shareholders’ approval for raising the borrowing powers of the board to Rs 25,000 crore from the current Rs 18,000 crore, and issue of non-convertible debentures on private placement basis. Also Read - Redmi Note 9 Pro next sale on July 14: Price in India, offers, specifications
Much of this is being done in anticipation of 4G spectrum allocation by the government as and when it happens, Purwar said adding that increase in borrowing powers would be crucial to meet the capital expenditure needs for roll-out of such services.
All private operators that MTNL competes with in the market already have aggressive 4G offerings. In fact, India is now making a compelling pitch to be a frontrunner in the global 5G space.
Once a household name, MTNL, which provides services in Delhi and Mumbai, has been relegated to a distant fourth operator in the market alongside Bharat Sanchar Nigam Ltd, another telecom PSU. The one billion subscribers-plus mobile market in India – incidentally world’s second largest after China – is growing exponentially as private operators like Vodafone Idea Ltd (merged entity), Bharti Airtel and Reliance Jio compete fiercely to lure subscribers with rock-bottom data tariffs and attractive offers.
MTNL admits it should have “entered 4G services 1-1.5 years ago” but that non-availiblity of spectrum posed a roadblock.
“The market is changing significantly from 3G for 4G. So, we have submitted a proposal to the Telecom Department for allotment of 4G spectrum. The proposal is that spectrum should be given by the government as licensor, and, secondly, as a promoter (of MTNL) it (government) should render the support in terms of infusion of equity (in lieu of 4G spectrum allocated),” Purwar told PTI.
Hence the proposals being placed before MTNL shareholders later this month will be enabling provisions in anticipation of 4G plan execution.
“In case, government accepts our proposal, MTNL should be able to execute it. We have asked for 5MHz spectrum in Mumbai and 10 MHz in Delhi, the value of spectrum is Rs 8,600 crore…this requires issue of equity and so it is an enablement provision…the notice to shareholders mentions that this is subject to allotment of spectrum by the government,” he said.
Similarly, the raising of borrowing powers would help the company tide over the capex needs involved in 4G roll-out.
“Once we get the 4G spectrum, investment will be required for services and capital expenditure to the tune of Rs 1,300-1,500 crore beyond the cost of spectrum. For that, we would like to utilise borrowing and are hence increasing the borrowing limits of MTNL,” he said.
Even after the necessary approvals and grant of the spectrum, it will take almost 9-12 months for MTNL to roll out 4G network and commercial services to customers, he noted.
On the issue of non-convertible debentures (NCDs) on private placement, MTNL has said that approval of members is being sought to authorise the board “to offer or invite or invite subscriptions for government guaranteed/ unsecured/ listed/ redeemable non-convertible debentures in the nature of bonds (NCDs), in one or more series / tranches, aggregating up to Rs 5,500 crore on private placement basis…” Today, most of MTNL’s loans are from banks, which are expensive as compared to soverign guarantee bonds, Purwar explained.
“So we are asking Telecom Department and the Finance Ministry to provide us a window to raise bonds from the market on the strength of sovereign guarantee. If it comes through, then our cost of borrowings will decrease by almost one per cent, which will give us saving of Rs 50 crore annually, reducing MTNL’s financial burden,” Purwar added.
This is published unedited from the PTI feed.