Public sector telecom company Mahanagar Telephone Nigam Ltd (MTNL) and another PSU, ITI Ltd, may be close to forging a new alliance. In 2003, MTNL had invested Rs 100 crore in subscribing to cumulative preference share capital of the telecom equipment manufacturer at 8.75 per cent a year. These shares were redeemable at par in five equal installments at the end of the 3rd, 4th, 5th, 6th and 7th year, making two installments redeemable as of today.

But ITI has failed to redeem the first two installments, for 2005 and 2006. To make good its loss, MTNL is considering a proposal to set off these payments from ITI — worth Rs 20 crore each — from the supply bills of ITI. The proposal, floated at MTNL’s board of directors meeting held on September 28, has been recorded as: “The board may authorise the company to set off the amount (Rs 20 crore each) from the supply bills of ITI Ltd.”

The meeting was attended by the full board of MTNL including CMD R.S.P. Sinha and directors in charge of HR, technology and finance. The board has also noted that, “MTNL believes that there is no need for impairment.”

A senior MTNL board member when contacted said it will be impossible to comment on proceedings of the director’s meeting. “I cannot say what was discussed at that meeting,’’ the member said.

Only in September 2006, MTNL awarded ITI and its French partner Alcatel a contract to supply equipment in Delhi and Mumbai, where the telecom service company is rolling out its crucial new 3G lineage. This new ITI-Alcatel order amounts to 2 million lines in Mumbai, of which a little under 1 million are 3G. Motorola, too has a similar offer, worth Rs 570 crore.

... contd.