MTNL

MTNL is locked on the 10% upper circuit yesterday. It hit the roof on reports that  MTNL is to sign a pact with PSU, BNNL, which will allow both the companies to utilize each others network, to provide better pan-India mobile services. Geographical restrictions did not allow these PSUs to compete with private sector companies which have a pan-India presence. But with this collaboration now, hopefully, MTNL and BSNL will now be on a level playing field and increased services could mean better earnings.  MTNL provides services in Delhi and Mumbai while the rest of the country is covered by BSNL. Post this agreement, MTNL would avail the network of BSNL only for national roaming service for its subscribers except in Delhi and Mumbai. In the same way, BSNL will only use MTNL network for roaming services to its customers in Delhi and Mumbai. MTNL would offer all its NLD (national long distance) traffic to BSNL except for the traffic between Delhi and Mumbai.

Prior to that, a week ago, MTNL had spiked up similarly on news that Group of Ministers (GoM), headed by Finance Minister P. Chidambaram, had decided to refund over Rs 11000 crore to MTNL and unlisted BSNL for returning broadband wireless access (BWA) spectrum.

Financially, the company is in the doldrums; it had ended Q1FY14 with a net loss at Rs.1256 crore. This is mainly on account of the huge operating costs, especially employee benefits. In current Q2, we could see some improvement in the loss recovery, which has less to do with operations and more with refunds. The company has received a refund from IT department to the tune of Rs.623 crore of which Rs.255 crore was adjusted against the Tax demand for the other Assessment Years and a net cheque amounting to Rs. 368 crore has been credited to MTNL on August 01, 2013. This plus the refund from spectrum return, which may happen in this fiscal, could help show a better bottomline.