Shares of government-owned Mahanagar Telephone Nigam Ltd (MTNL) surged nearly 5 per cent on Thursday, a day after the Union Cabinet approved its merger with Bharat Sanchar Nigam Ltd (BSNL). In an official statement on Wednesday, the Cabinet said the plan is expected to enable the two companies to provide reliable and quality services through a robust telecommunication network across the country including rural and remote areas. On the Bombay Stock Exchange (BSE), MTNL shares rose as much as 4.92 per cent to an intraday high of Rs 6.19 apiece on Thursday.
The stock rose to as much as Rs 610 apiece on the National Stock Exchange (NSE), marking an increase of 4.27 per cent from its previous close.
"The Union Cabinet approves the proposal for revival of BSNL and MTNL by administrative allotment of spectrum for 4G services, debt restructuring by raising of bonds with a sovereign guarantee, reducing employee costs, monetisation of assets and in-principle approval of the merger of BSNL and MTNL," the government said in the statement. The move comes at a time public sector companies MTNL and BSNL are facing financial stress amid intense competition in the telecom sector.
MTNL and BSNL will monetise their assets so as to raise resources for retiring debt, servicing of bonds, network upgradation, expansion and meeting the operational fund requirements. MTNL and BSNL will also raise long-term bonds of Rs 15,000 crore for which sovereign guarantee will be provided by the government.
As of 2:06 pm, MTNL shares traded 4.92 per cent higher at Rs 6.19 apiece, outperforming the Sensex which was down 0.29 per cent.