MTNL found its recent popularity in the market dwindling on Wednesday after it announced a partial rollback of the hike in basic rates which came into effect from 1 May 2003.

By 13:35 IST, the scrip of Mahanagar Telephone Nigam, a service provider in Mumbai and Delhi, slumped 3.99% to Rs 96.25. Over 163,000 MTNL shares changed hands on BSE by then. In the 11 sessions between 24 April and 13 May 2003, the scrip of the state-run telecommunications service provider had risen 11.4% to Rs 100.25 from Rs 90.

The company yesterday partially detracted on a recent hike in tariff rates. The PSU telecom services provider also doubled the number of free calls per month to 60 with effect from 1 May, while it retained its fixed to cell tariff levels at the revised rate of Rs 1.20 per minute. For MTNL, the impact of the hike in the free calls would be Rs 140 crore (Rs 1.4 billion).

Analysts say the rollback of new tariffs will further put pressure on the revenues of the company. Reports reveal that the company may take a hit of Rs 140 crore (Rs 1.4 billion) due to its rollback and increasing free calls.

In the stock markets, MTNL was witnessing sustained buying from institutions over the last few sessions. Analysts say that institutions were accumulating the stock as the company's revised tariff charges were expected to enhance profitability. The inter-connect charges regime, had in fact, come into effect from 1 May 2003. MTNL had then reset tariffs and slashed the number of free calls, retained the three-minute pulse for local calls and kept unchanged overall monthly rentals.

Earlier there were reports suggesting that the Department of Telecommunications was planning to permit an expansion of operations by MTNL beyond Delhi and Mumbai. Apart from acquisitions of private cellular operators, a proposal is under consideration to allow MTNL to acquire the Maharashtra circle from BSNL (after due compensation). With huge reserves at its disposal, MTNL is very much in a position to carry out mergers and acquisitions.

MTNL's mainstay is basic services in the two metros of Mumbai and Delhi. However, the company is witnessing stiff competition from private operators here. It recently entered a new services line - cellular services - where there is already stiff competition.

The company is also looking to be a certifiying authority for digital signatures and will be applying for a CA licence in the first week of June 2003. Currently, there are four licence-holders in this category - NIC, Satyam Infoway arm SafeScrypt, Hyderabad-based RBI arm IDRBT and TCS.

Earlier, there were reports that MTNL's privatisation may take place sooner than expected, but nothing has materialised on this front so far. The Government of India holds 56.25% of the total equity capital in MTNL, while institutions and the public hold 40% and 2%, respectively.

Recently, the Group of Ministers cleared the proposal to raise foreign equity ceiling in basic telecom and mobile services companies to 74% from the current 49%. This should have some bearing on the company.

For Q4 ended 31 March 2003, MTNL recorded a huge 56% fall in net profit to Rs 183.62 crore (Rs 1.83 billion) on a 2% drop in sales to Rs 1,356.49 crore (Rs 13.56 billion).

BSE code: 500108