MTNL got a veritable boost from Trai's hiking monthly rentals, an indication that flagging revenues will now be higher.

By 11:25 IST on Monday, the scrip of the telecom service provider gained 2.99% to Rs 87.80. The scrip registered volumes of over 2.7 lakh shares on BSE till then. The BSE Sensex stood at 3,263.35, down 24.51 points.

In the 24 sessions between 20 December 2002 and 24 January 2003, the scrip of Mahanagar Telephone Nigam shed 20.5% to Rs 85.25 from Rs 107.20.

On Saturday, 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.

Meanwhile, Trai 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.

Dealers say buying in MTNL was purely on the announcement that Trai has increased monthly rentals, which will boost revenues of MTNL, a major player in urban telecom service. 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 performance - 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).

Analysts feel that new and aggressive competition in the telecom sector is taking its toll on the company. And warn that still tougher days are in store for the PSU telecom service provider. Already funds have started moving out of the counter following concerns over the company's future growth prospects.

The only trigger for the company's stock is its possible disinvestment, which is not expected to be before FY 2004. 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.

BSE Code: 500108