MTNL seeks to exit UTL
KATHMANDU:
Mahanagar Telephone Nigam Ltd (MTNL) has decided not to invest further in United Telecom Ltd (UTL) saying that the venture is not commercially viable. The major shareholder of UTL has also proposed to sell its stake, according to Indian media reports.
MTNL is an Indian state-run company and has 26.68 per cent stake in UTL, the first private sector telecom company of Nepal. The decision has come at a time when UTL is in need of further investment to acquire unified licence, which would allow it to operate multiple telecom services, including nationwide GSM mobile.
About 18 months ago, Nepal Telecommunications Authority (NTA) had decided to issue the unified licence to UTL. A source at UTL said that the prolonged discussion regarding share ownership is the main reason behind the delay in acquiring the new licence. “If MTNL’s proposal to sell its stake gets a go ahead from the Indian government, the Nepali partner is likely to inject additional funds and increase stake,” the source added.
Nepal Venture, a local joint venture company, has 20 per cent share in UTL. MTNL’s proposal to sell its stake is under consideration at the Department of Telecommunications, India. Two other Indian companies — Telecommunications Consultants India and Tata Communications — each have investment of 26.66 per cent in UTL.
After the need to increase investment came into the spotlight, the company shareholders had also floated an idea of issuing rights shares, but MTNL has decided not to invest. It had also hired SBI Capital Markets, a consultant, to evaluate the feasibility of investments in UTL. MTNL itself is one of the top 10 loss-making government owned firms in India, according to reports.
To take the new permit from NTA, UTL will require an investment of Rs 357.5 million as licence fee and commitment to pay renewal fee of Rs 20.13 billion within 10 years after receiving the permit. Based on the NTA decision, it immediately made an upfront payment of Rs 102 million as licence fee in April last year.
According to NTA, the company also has Rs 1.22 billion outstanding dues to the government as committed royalty. As of last fiscal year (mid-July, 2014), UTL had 508,841 subscribers in voice and 56,744 in data segment.
Meanwhile, a recent meeting of UTL shareholders agreed to increase the authorised capital to Rs six billion. According to reports, investors have also reached a decision which allows the rest of the shareholders, apart from Nepal Venture, to exit UTL after two years after giving a three-month notice.
Present scenario
• MTNL’s proposal to sell stake under consideration at Dept of Telecom, India
• Nepal Venture likely to inject additional funds and increase stake
• UTL needs to invest Rs 357.5m as licence fee and commitment to pay renewal fee of Rs 20.13bn within 10 years after receiving NTA permit
Source: THT
