MTNL wants govt to reimburse Rs 2,800 cr interest on spectrum loan

financial chronicle

Business, Companies

MTNL surrendered the BWA spectrum and the principal amount of Rs 4,534 crore was returned.

MTNL also sought fund infusion by the promoters (government) to remain in competition.

New Delhi: State-run MTNL, fighting hard to survive, has written to the department of telecom to reimburse the interest component of Rs 2,800 crore on a loan it had taken earlier to acquire the BWA spectrum and also to fund its proposed Rs 1,100 crore VRS programme, a senior official said.

These two are part of a three-step revival plan offered by MTNL to the telecom ministry. The other measure being transferring the land and building, for monetisation, along with the current debt of Rs 17,500 crore to a separate entity. The PSU, thriving on loans, is faced with heavy interest costs that threatens its viability.

“MTNL surrendered the BWA spectrum and the principal amount of Rs 4,534 crore was returned to us. But due to a loan  that we had taken from the banks to buy the spectrum, we have an outstanding interest component of Rs 2,800 crore. So, we have written to the government if they take a one-time decision to reimburse the interest amount”, the official said.

According to DoT sources, the government has formed an internal committee headed by special secretary N Sivasailam, with member-finance and wireless advisor as other members, to look into MTNL revival options.

MTNL has told this internal committee that it is operating under three man constraints–a high manpower numbering 25,000, a Rs 17,500-crore loan burden and lack of investment in the last seven years.

To tackle the manpower problem, MTNL has suggested the government to fund its VRS programme as and when it takes place since the majority of this 25,000 staff is from the DoT. The PSU has worked out that for offering voluntary retirement to 5,000 employees, it will need at least Rs 1,100 crore,

The PSU is saddled with a debt of Rs 17,500 crore, out of which the interest component is Rs 1,450 crore. It wants the government to allow it to carve out the land & buildings and the debt, so that the MTNL balance sheet becomes debt-free, without putting any burden on the exchequer.

“We have written to DoT to carve out our land and buildings along with debt to a 100 per cent-owned government company in such a way that it is equivalent to the debt we have. This way MTNL can be made a debt-free company,” said P K Purwar, chairman and managing director, MTNL, in an exclusive interview with the Financial Chronicle.

If allowed, these land and buildings can be developed over a period and start generating revenues and repay the debt, he said.

Most land and buildings of the PSU are allotted to it by the developmental authority as a lease holding. But these have a market value, Purwar said. MTNL also sought fund infusion by the promoters (government) to remain in competition.

All operators are making investment on the strength of their promoters, who are pumping money into the companies and MTNL is looking for a similar kind of support from the government. The company has never received any equity infusion from the government. Rather the government has sold 44 per cent of its stake from time to time and is now left with 56 per cent holding.

Purwar  said MTNL doesn’t see any way other than the three-pronged solution, to move forward and generate funds for network upgradation to compete.