MTNL shares jump 10% as telco secures govt funding for 4G expansion

Shares of state-owned Mahanagar Telephone Nigam (MTNL) rallied over 10% in opening trade on Monday, in an otherwise weak broader market, amid report that the government has approved additional capital to support 4G expansion in India. In a bid to push for the 4G rollout of Bharat Sanchar Nigam Limited (BSNL) and its subsidiary, MTNL, the Union Cabinet approved an additional ₹6,000 crore funding at its meeting last Friday, though no official announcement was made at the press briefing.

Cheering the news, MTNL share price gained 10% to hit a high of ₹57.56 on the BSE, while the market capitalisation climbed to ₹3,512 crore. The state-owned telecom stock has risen 25% since Budget announcement on February 1, while it jumped over 13% in two sessions.

MTNL shares touched its 52-week high of ₹101.88 on July 29, 2024, and a 52-week low of ₹31.24 on March 20, 2024. In the last one year, the PSU stock has given 28% return to its shareholders, while it lost over 12% in six months. In the past one month, the counter has gained over 22%.

MTNL, which provides telecom services in Mumbai and New Delhi, recently signed a deal with BSNL to expand their 4G networks. In August last year, the two state-owned companies inked a 10-year agreement to enhance their network services, offering improved 4G connectivity to its customer base. As part of the deal, the companies will set up around 100,000 4G sites to expand their 4G networks across the country to compete with private players like Airtel, Vodafone Idea, and Reliance Jio.

The central government, which holds 56.25% stake in MTNL, has approved a financial package of approximately ₹6,000 crore to accelerate the 4G network expansion of BSNL and MTNL. The government has already provided financial support of ₹3.22 lakh crore to BSNL and MTNL through three separate revival packages.

The cabinet had previously approved a revival plan for BSNL and MTNL, which included reducing employee costs, allocating 4G spectrum, restructuring debt, and monetising assets. The plan also involved the merger of BSNL and MTNL and raising ₹17,571 crore through sovereign guarantee bonds by March 31, 2024, to address and restructure debt.

For the second quarter of the current fiscal (Q2 FY25), MTNL reported consolidated net loss of ₹890.28 crore, from ₹792.82 crore posted in the same period of the previous fiscal. Revenue from operations declined 11.93% YoY to ₹174.23 crore in the quarter ended September 30, 2024. On the margins front, the company reported negative operating margin of 156.75% in Q2 FY25 as against negative 152.55% recorded in Q2 FY24.

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