For 4G rollout & to take on rivals, MTNL to raise authorised capital, borrowing limit: CMD

Mahanagar Telephone Nigam Ltd plans to seek shareholders’ approval for raising the authorised share capital to ₹10,000 crore and borrowing powers by almost 40 per cent to aid the state-owned corporation’s 4G plans and provide it the firepower to compete in the market, MTNL chairman PK Purwar has said.

At a time when the sector that has seen shuffling of the top deck with the recent completion of Vodafone and Idea Cellular merger, MTNL has lined up an annual general meeting on September 28 to raise the authorised share capital to ₹10,000 crore from ₹800 crore, as an enabling provision.

It has also sought shareholders’ approval for raising the borrowing powers of the board to ₹25,000 crore from the current ₹18,000 crore, and issue of non-convertible debentures on a private placement basis.

Much of this is being done in anticipation of 4G spectrum allocation by the government, Purwar said adding that increase in borrowing powers will be crucial to meeting the capital expenditure needs for roll-out of such services.

All private operators that MTNL competes with already have aggressive 4G offerings and, in fact, India is now pitching to be a frontrunner in the global 5G space.

MTNL admits it should have “entered 4G services some two years ago” but had been stymied by non-availiblity of spectrum.

Proposal for 4G

“The market is changing significantly from 3G to 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 (the government) should render the support in terms of infusion of equity (in lieu of 4G spectrum allocated),” Purwar told. “In case, the 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 ₹8,600 crore...this requires issue of equity and so it is an enabling provision... The notice to shareholders mentions that this is subject to allotment of spectrum by the government,” he said.

Borrowing power

Similarly, the raising of borrowing powers will 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 ₹1,300-1,500 crore beyond the cost of spectrum. For that, we would like to borrow and are hence increasing the borrowing limits of MTNL,” he said.

Even after the necessary approvals and grant of the spectrum, it will take 9-12 months for MTNL to roll out the 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 to ₹5,500 crore on private placement basis...”

Today, most of MTNL’s loans are from banks, which are expensive compared to soverign guarantee bonds, Purwar explained.

“So, we are asking the 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 borrowing will decrease by almost one per cent, which will give us a saving of ₹50 crore annually, reducing MTNL’s financial burden,” Purwar added.

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