Unpaid bills of the department of telecommunications (DoT) and Mahanagar Telephone Nigam Ltd (MTNL) have reached staggering proportions. The country's two largest telecom operators face the prospect of writing off Rs 3,500 crore.
DoT's outstandings are estimated to have climbed to almost Rs 2,500 crore while MTNL, a 63 per cent government-owned public sector undertaking, is estimated to be carrying Rs 975 crore of unpaid bills on its accounts. The amounts vary between 17 and 18 per cent of the two operators' gross revenues.
Analysts pointed out that mounting unpaid bills might have a negative impact on net revenues of DoT and MTNL. A write-off would imply that both operators take an expense charge on account of unpaid bills after gross profits on their profit and loss accounts. "There are two options before DoT and MTNL. They can try to recover the outstandings or they have to write them off," an analyst said. Given that the first option is difficult, they may opt for write-offs over a few years.
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This may happen sooner than expected if shareholders, especially in case of MTNL, put pressure on them.
Late last year, MTNL completed a $413 million global depository receipts (GDR) issue, which saw the participation of investors from the US, Europe, Japan and the rest of Asia. This amount was equivalent to Rs 1,600 crore at the prevailing exchange rate.
Foreign institutional investors usually insist on strict accounting norms and transparency in financial accounting.
For DoT, sources said, the situation gets worse due to the poor state of accounts and a severe paucity of data.
"We have a genuine problem here. More so, because the department is going to be corporatised soon," a DoT official admitted. The government is finalising a Rs 12,000 crore corporatisation plan for DoT. If it is corporatised, the department will have to adopt standard corporate accounting practices and ultimately take a charge on account of unpaid bills.
DoT recorded a turnover of Rs 14,500 crore in fiscal 1997-98, which is expected to grow 10-12 per cent this year.
MTNL's outstanding bills have been mounting steadily since 1996. At the end of June 1996, the company had a total of Rs 745 crore in unpaid bills (cumulative of Mumbai and Delhi), which grew 17 per cent to Rs 873 crore for the year ended June 1997, and to Rs 975 crore as of June 30, 1998.
Both DoT and MTNL have a peculiar problem compared to private operators. To avoid paying their bills, many defaulting subscribers just disconnect their existing lines and apply for a new telephone.