Expect operational profits by next fiscal year: MTNL

Talking to CNBC-TV18, NK Yadav, CMD, MTNL, said he expects the company to start making operational profits in the next fiscal year. The telecommunications service provider has been suffering losses due to its constant attempts at trying to improve quality of service. But next fiscal year, he said, there is going to be a turnaround.High salary and interest costs have hurt its profits. It is looking at a Voluntary Retirement Scheme for its employees as a way to cut salary costs, said Yadav.Along with farming out towers and buildings, the company would also want to share its fiber optics, which are in high demand among all operators, he said. This would fetch them about Rs 1,000 crore in the next three years.MTNL has a debt of about Rs 13,000 crore which has primarily risen due to structural charges that they paid the government in 2010. This has discouraged them from investing in infrastructure.Below is the verbatim transcript of NK Yadav's interview with Nigel D’Souza, Varinder Bansal and Ekta Batra on CNBC-TV18.Nigel: Could you tell us this 25 crore is it for this past quarter. Do you believe that it’s sustainable going ahead as well and can we look at this quarterly run-rate of profit of around 25 crore as well?A: In fact from quarter 2 to quarter 3 there is an increase of 25 crore in the revenue and even the expenditure have been reduced by 6 crore, so we are trying to now move into a better era. This is the company’s effort. Varinder: I couldn’t under the statement which has come in from the Telecom Minister? He is saying that, do you as a company made a 25 crore profit this quarter.A: Not profit, it is increase in revenue.Varinder: Increase in revenue of how much?A: 25 crore from quarter 2 to quarter 3.Ekta: So how much is your total revenue and what is your bottom line then?A: See this revenue has increased to Rs 865 crore in the quarter ending December as compare to the quarter last quarter.Varinder: I can see that the consistent run-rate in case of revenue last quarter it was Rs 771 crore it was Rs 787 crore, I am more interested in the bottom line number. Is there any improvement which has been seen in terms of the bottom line by MTNL because you have been consistently making losses because of many, many reasons?A: See, I have already made a statement that we are working hard and try to improve our quality of service, so that, we will be in operation profit by next year. This is our efforts.Varinder: Operational profit?A: Yes, operational profit.Varinder: Does this include monetisation of assets what you have or non-operating assets you have?A: Yes, in fact, we are trying to now open up in addition to our towers and building on rents. We are trying to open up in ducts and fibre segment also.Varinder: So FY16 there is no profit what the company has made in total year?A: No, no it is not a profit. See profit because we have got a debt of about Rs 13,000 crore that is because of the spectrum charges we have paid in 2010, Rs 11,000 crore to the government. For that we have borrowed the money from the banks and that is the problem we are facing because of that. Because of that we are not able to invest in our infrastructure at all.Ekta: What led to the increase in revenues at least on a quarter-on-quarter (Q-o-Q) basis for you?A: This in the improvement in the quality of service, so that our customer retention has now flattens which was decreasing and second is we are trying to see our assets like buildings, towers sharing of our infrastructure.Varinder: You made an operational loss of Rs 1,500 crore in nine months FY16?A: See our problem is totally different whatever revenue we are earning 78 percent of its go for the salaries. That is a problem, so we are trying to come out with a voluntary retirement scheme (VRS) shortly to address this segment.Nigel: Varinder, my colleague was just talking about earnings, before income tax (EBIT) loss that you are making. Every quarter you are making around Rs 450 crore as an EBIT loss. Are you going to be looking at this VRS scheme? How soon can we hear about this VRS scheme and when can we see those losses because I am looking at it on a consistent basis it is at around Rs 450 crore that’s the EBIT loss. So two questions, when exactly can we see this EBIT loss diminishing and also when can we hear about this VRS scheme?A: See the diminishing part is already there, but because the salary costs is too high and then we have got an interest cost also which is about Rs 1,300 crore a year which we have to pay to the banks. These two costs are there, so we are trying to reduce these costs. First, we are talking of VRS so that the salary bills are reduced. Fortunately for us the pension has been now taken care of by the government, because these employees were all government employees.Varinder: What could be the value of the non-core assets the company has. We have been hearing since ages many, many years that the company has been trying to monetise anything you have, but there is no result which has come out of it. That will of course help you to reduce the debt and of course pay some of the employees. What is the update on that?A: See earlier, we were only talking about sharing of buildings, sharing of towers. Now we are talking of sharing of fibres which is the requirement of all the operators, this is the first time we are doing that.Latha: So how much money do you get from that?A: May be about Rs 1,000 crore in three years.Latha: This non-core asset monetisation will that be done by the National Institution for Transforming India Aayog (NITI Aayog) because that was the overall plan of the government that the NITI Aayog will look at divesting assets of various PSUs or will do you it directly?A: No, no this is our company policy. We are opening up fibre segment.Latha: I am only asking you about the previous question about the monetisation of non-core assets of land?A: So that is not possible because all those things, we have to take permission from government, without government all these things cannot be done, so they are for specific purpose, specific use. It cannot be sold like that.Ekta: There were reports as of March where the government had approved the compensation of around Rs 450 crore to MTNL. Has that money come in because we understand over Rs 400 crore was already sanctioned?A: Yeah, in fact, we have got a more than Rs 1,000 crore this year. That is basically for spectrum, code division multiple access (CDMA) spectrum and minimum alternate tax (MAT), so this is about Rs 1,000 crore which was supposed to be given back, which was promised earlier which we have got.Nigel: Your interest costs per quarter used to be around Rs 360 crore has come down to around Rs 330 crore so that’s a 10 percent reduction. Has some part of the debt has well come down or it’s just the borrowing cost that’s gone down?A: No, in fact, the debt has slightly it has reduced not much, but the government support which we have got from refunds, we are in more comfortable position.