MTNL is the subject of renewed focus as the government takes an initiative to study the feasibility of the company's privatisation.

The scrip of the state-run telecom service provider gained 2.4% to Rs 114.60 on BSE today. Volumes were decent at 3.2 lakh shares on BSE .

On 24 June 2003, a recent volume-led surge was witnessed when the stock gained 4.9% to Rs 107.05 as 13.3 lakh shares were traded. The firmness on the counter continued next day as the stock surged 4.5% to Rs 111.90. Volumes then were 13.9 lakh shares. According to dealers, local mutual fund Prudential ICICI has been accumulating the stock of late.

In fact, from a low of Rs 93.35 on 30 May 2003, the stock has surged 22.7% in 21 trading sessions to the current Rs 114.60. The rally on the counter has come amid volatility, though. Technical analysts see a further upside in the stock based on its technical price patterns .

The stock recently got a boost from reports that the government has asked the Disinvestment Commission to study the privatisation of MTNL and Bharat Sanchar Nigam (BSNL). The reason why the government, it is reported, is now keen on an early disinvestment of the two telecom PSUs is because it is wary that the valuations of the two PSUs may depreciate as time moves on. Too much competition may also cause the two companies to appear less attractive later.

Already private telecom players have started eating into the market share of MTNL by offering competitive tariffs.

MTNL has been facing pressure on its bottom lines owing to competition from private telecom companies in both basic telephony and cellular telephony. MTNL, on its part, has been unable to respond quickly to the changing market requirements and has lost subscribers in the bargain. Basic services of MTNL, the company claims, have seen a dip in subscriber base.

MTNL is a basic service provider in the Mumbai and Delhi circles. Earlier, there were reports that the Department of Telecommunications (DoT) is planning to permit an expansion of MTNL's operations beyond Delhi and Mumbai.

Apart from acquiring private cellular operators, a proposal is under consideration to allow MTNL to acquire the Maharashtra circle from BSNL (after due compensation). With huge reserves (of around Rs 2,000 crore) at its disposal, MTNL is very much in a position to carry out mergers and acquisitions (M&A).

For Q4 ended 31 March 2003, MTNL recorded a huge 56% fall in net profit to Rs 183.62 crore (Rs 416.18 crore) on a 2% drop in sales to Rs 1,356.49 crore (Rs 1,380.53 crore). For FY 2002-03, the company posted a 32.6% fall in net profit to Rs 877.15 crore (Rs 1,300.68 crore) on a 6% drop in turnover to Rs 6,030.66 crore (Rs 6,392.07 crore).

MTNL had attributed the poor FY 2002-33 results to decrease in income and increase in expenditure compared to the previous year. MTNL announced a 45% dividend for FY 2002-03.