MTNL to raise Rs 7k cr via govt bonds

Move aimed at wiping of the firm's debt, for which it has been paying Rs 1,100 cr as interest every year

State-run telecom operator Mahanagar Telephone Nigam Ltd (MTNL), which operates in Delhi and Mumbai, is set to raise between Rs 5,000 crore and Rs 7,000 crore this financial year by issuing sovereign bonds — those backed by the government — to reduce its debt burden.

“We have sought the government’s approval to issue sovereign bonds. We expect to get the permission soon. The bonds would be issued within three months from the date of approval,” said Chairman and Managing Director A K Garg.

The main purpose for issuing these long-term bonds would be debt reduction. MTNL, in which the government holds 56.25 per cent stake, had borrowed a little more than Rs 11,000 crore to pay for spectrum — Rs 6,500 crore for 3G and Rs 4,533.97 crore for wireless broadband access (BWA). “For this loan, we pay about Rs 1,100 crore as interest annually. This has become a huge burden for the company,” Garg said.

The state-owned telco has already surrendered the BWA spectrum to the government, seeking a refund of the money paid for it. “With the sovereign bonds, we will be able to clean up the debt and the company would be able to save about Rs 1,100 crore it is paying as interest every year,” he said.

MTNL FACT SHEET

Reported loss
2011-12 Rs 4,109 cr
2010-11 Rs 2,801.92 cr

• Expected revenue: Rs 3,600 crore a year
• Expected growth: 5-10% annually
• Debt burden: Borrowed Rs 6,500 crore to pay for 3G and Rs 4,533.97 crore for BWA spectrum
• Interest outgo: Rs 1,100 crore a year

PLANNED RECAST: 

• Refund of Rs 4,533.97 cr for the surrendered BWA spectrum
• To raise Rs 5,000-7,000 crore through sovereign bonds
• Monetising bank of 230,000 sq m of commercial and 380,000 sq m of residential land in Delhi and Mumbai
• Selling unused flats and isolated constructed space to get close to Rs 300 cr
• Renting out space at the existing buildings to earn Rs 100 crore

SUBSCRIBER BASE:

• GSM: 5.12 million
• CDMA: 0.24 million
• Fixed-line: 3.45 million

The telco, which reported a loss of Rs 4,109 crore in 2011-12, hoped to turn cash-positive within the current financial year, if it got government support, Garg pointed out, adding the company would be able to increase its revenue by 5-10 per cent annually after its debt had been wiped off. However, making a net profit might take three-four years, he said.

The company hopes to close the current financial year with a revenue of about Rs 3,600 crore.

Besides, it is also in process of appointing an external consultant to finalise the possible ways to monetise its land bank, primarily in Delhi and Mumbai. It has about 230,000 square metres of technical and 380,000 sq m of residential land in Delhi and Mumbai that could be used for commercial purposes. The state-owned company would form project-specific partnerships with private firms for development and construction on these land tracts. The developed properties would be rented out, but MTNL would continue to own the pieces of land, he added. A consultant is expected to be appointed within a month.

Also, the company is planning to sell its unused flats and isolated constructed space that could fetch it close to Rs 300 crore. It also expects to earn about Rs 100 crore by renting out spaces at the company’s existing buildings.

The financial restructuring was planned as MTNL needed to report profits to retain the Navratna tag it had got in 1997. The loss-making government-owned company has already made presentations to the Department of Public Enterprises, detailing its plans on how it would improve its financial condition.

With only 5.12 million GSM and 0.24 million CDMA subscribers in Delhi and Mumbai in October, MTNL is still a small player in the mobile space, near the bottom in the pecking order.

It has a fixed-line subscriber base of 3. 45 million.