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You can view full text of the latest Director's Report for the company.

BSE: 500108ISIN: INE153A01019INDUSTRY: Telecom Services

BSE   ` 13.98   Open: 13.80   Today's Range 13.66
14.15
+0.21 (+ 1.50 %) Prev Close: 13.77 52 Week Range 12.45
31.25
Year End :2017-03 

To

The Shareholders,

of Mahanagar Telephone Nigam Limited

Dear Shareholders,

Your Directors present the 31st Annual Report of your Company together with the Financial Statements and the Report of the Auditors as well as comments of Comptroller & Auditor General of India on the Financial Statements for the financial year ended on March 31, 2017.

PERFORMANCE REVIEW OF MTNL FOR THE FY 2016-17

1. The achievements of MTNL during the year 2016-17 are as follows:

- Expansion of 3G RF network in Delhi: MTNL is in the process of expansion of mobile network by adding 1080 nos. of 3G sites for upgrading Data handling capacity to 10 Gbps. MTNL placed Purchase Order worth Rs, 319 Cr. for expansion of 3G Network by adding 1080 Node-Bs and replacement of core network. Installation of core network has been completed and testing is in progress. Cold installation of 400 Node-Bs has been done.

- Up gradation/replacement of 3G RF network in Delhi: Purchase Order for Rs, 42 Cr has been placed for up gradation of existing 720 nos. of 3G Node-B for 'HSPA ' capability along with up gradation of Backhaul. (24 Cr for RF Up gradation and 17.7 Cr for Backhaul).

- 3G Network Up-gradation in Mumbai: To improve network capabilities and provide better speed, MTNL is in process of upgrading existing 3G network (720 Node-Bs). S/W Up-gradation for the existing Node-Bs has been implemented. 161 Node B's have been integrated with OFC Media for 21 Mbps speed.

With the ongoing expansion and up gradation, enhance Downlink speed will be 21.1 Mbps & Uplink speed of 5.76 Mbps against present 3.6 Mbps downlink & 384 Kbps uplink per sector speeds.

2. The initiatives taken by MTNL during the year 2016-17 are as follows:

- Broadband Network:

- To provide higher data speeds and better quality of services for broadband services, MTNL has launched a special program to progressively increase the fibre length by redeploying the broadband nodes (DSLAMs) near to the customer.

- 173 nos. of Digital Subscriber Line Access Multiplexer (DSLAMs) have been redeployed in Delhi and 152 nos. in Mumbai thereby reducing copper length and enhancing the quality of broadband service.

- Fiber To The Home (FTTH): Policy to Empanel partners for provisions of FTTH/VAS services in Delhi & Mumbai on revenue share basis has been made operational. The new policy has been made more flexible to attract more partners and more customers.

- High Speed Broadband on FTTH and Wi-Fi services for Hon’ble MPs: MTNL has provided high speed Broadband on FTTH and Wi-Fi services at the residences of 750 Hon'ble MPs in Delhi in year 2016-17.

- Mumbai city surveillance project: Provided connectivity to 4,717 cameras installed at 1,510 locations across the Mumbai city covering almost 80% of the city. Project was dedicated to Nation on 02-Oct 2016 by Chief Minister, Maharashtra.

- Wi-Fi Hot-spot for Mumbai City: Provided connectivity to setup 500 Wi-Fi Hot spot by Govt. of Maharashtra. Project commissioned on 9th Jan 2017.

- ATC Project for Mumbai City: MTNL provided connectivity at 133 locations for Area Traffic Control Project of Mumbai Traffic Police for Road Traffic Monitoring.

- Wi-Fi hotspot at tourist places in Delhi and Mumbai: MTNL is establishing Wi-Fi Hotspots at tourist places and important public areas all over Delhi and Mumbai for digitally connecting the people of Delhi. The Services has been launched at 14 places in Green Park market, Hauz Khas Village, Aurobindo market, National Museum, India Gate, Qutab Minar, Safdarjung Tomb, Humayun's Tomb, Red Fort, Purana Qila, Lodhi Garden, Nehru Place Market and Defence Colony market of Delhi city and Elephanta cave in Mumbai City.

FINANCIAL RESULTS FOR THE F.Y. 2016-17

The Financial Statements of the Company have been prepared in accordance with the Indian Accounting Standards (IND-AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. The Financial Statements for the Financial Year ended March 31st, 2017 are the Company's first IND-AS compliant annual financial statements with comparative figures for the year ended March 31st, 2016 also under IND-AS. The date of transition is April 1st, 2015. The disclosure and effect of first time adoption of IND-AS are detailed in Note 55 of the Standalone Financial Statements and Note 59 of the Consolidated Financial Statements for detailed disclosure and effects on the first time adoption of IND-AS. The Standalone and Consolidated Financial highlights of your company for the Financial Year ended March 31st, 2017 are summarized as follows:

Sources and Application of funds for the FY 2016-17 are given below:-

(IN CRORES ')

Standalone

Consolidated

2016-17

2015-16

2016-17

2015-16

Income from Operations

2,869.68

3,123.96

2,969.37

3,223.16

Expenditures (Excluding Finance Cost)

5,049.44

5,097.59

5,146.47

5,193.09

Operating Profit/(Loss)

(2,179.76)

(1,973.63)

(2177.10)

(1,969.93)

Other Income

682.78

569.22

685.32

570.73

Finance Cost

1,448.47

1,351.34

1448.47

1,351.34

Profit/(Loss) before Tax

(2,945.45)

(2,755.75)

(2940.25)

(2,750.54)

Exceptional Items

-

-

-

-

Share of profit/(loss)in investments accounted for using equity methods

-

-

0.69

(2.42)

Tax Provision for the Year

(4.38)

(492.26)

(3.51)

(491.15)

Profit/ (Loss) for the Year from Continuing Operations

(2,941.07)

(2,263.49)

(2,936.05)

(2,261.81)

Profit/ (Loss) for the Year from Discontinuing Operations

-

315.95

-

315.95

Profit/ (Loss) for the Year

(2,941.07)

(1,947.54)

(2,936.05)

(1,945.86)

Other Comprehensive Income

(29.49)

(5.82)

(32.83)

1.79

Total Comprehensive Income for the Year

(2,970.56)

(1,953.36)

(2,968.88)

(1,944.07)

Appropriation

Interim/ Proposed Final Dividend

-

-

-

-

Dividend Tax

-

-

-

-

Transfer to/(from):

a) Contingency Reserve

-

-

-

-

b) Debenture Redemption Reserve

-

-

-

-

SOURCES AND USES OF FUNDS

Authorised Capital

800.00

800.00

800.00

800.00

Issued, Subscribed & paid up capital

630.00

630.00

630.00

630.00

Other Equity

(3,996.70)

(1,026.13)

(4,003.85)

(1,034.97)

Non-Current and Current Borrowings

15,196.55

13,436.78

15,196.55

13,436.78

Deferred Tax Liability (Net)

-

-

4.60

3.91

REPRESENTED BY

Property, Plant and Equipment (Net Block)

4,808.32

5,321.00

4,928.12

5,456.90

Capital Work in progress

291.34

136.87

291.34

136.87

Investment Property

46.52

39.59

53.68

39.59

Intangible Asset (Net Block)

3,776.69

4,117.00

3,777.69

4,118.27

Investment

141.98

141.98

3.81

3.12

Other Assets

8,598.11

8,887.63

8,638.63

8,917.58

Other Liabilities

5,833.11

5,603.42

5,865.97

5,636.61

The Company has prepared these consolidated and standalone financial results in accordance with the Companies (Indian Accountant Standards) Rules, 2015 (Ind AS) prescribed under section 133 of the Companies Act, 2013. The Company has adopted the Indian Accounting Standards (Ind AS) from 01.04.2016. The comparative financial information of the Company for the year ended 31.03.2016, which have earlier been prepared as per IGAAP, have also been restated to comply with Ind AS.

INFORMATION REGARDING ISSUE OF BONDS BY MTNL DURING FINANCIAL YEAR 2016-17.

The Company has not issued any debenture/ bonds during Financial Year 2016-17.

DIVIDEND

Since there has been no operating profit during the FY 2016-17, the Board of Directors of your company expresses its inability to recommend any dividend for the year under report.

SUBSIDIARY AND JOINT VENTURE COMPANIES

As on 31st March, 2017, your company has two subsidiaries and one Joint Venture and one Associate company. There has been no material change in the nature of the business of the Subsidiaries. Pursuant to the provisions of Section 129 (3) of the Act, a statement containing salient features of the Financial Statements of the Company’s Subsidiaries in Form AOC-1 is attached to the Financial Statements of the Company and published in this report. Further, pursuant to the provisions of Section 136 of the Act, the Financial Statements of the Company, Consolidated Financial Statements along with relevant documents and separate Audited Accounts in respect of Subsidiaries have been published with this report and the same are also available on the website of the Company. The other details of Subsidiaries and Joint Venture Companies are briefly given as under:-

(i) Mahanagar Telephone (Mauritius) Ltd. (MTML)

MTML is a 100% subsidiary of MTNL. The company is having license for mobile services, international long distance services and internet services. The customer base of MTML as on 31st Mar'17 has grown to 289,161 resulting in a market share of around 20%. MTML is offering 2G/3G services in all over the island and 4G services at selected areas. 4G expansion is being done by which 80% of the island will be covered over 4G network and it is expected to be completed soon.

Though there is a slight decrease in revenue of the company mainly due to fierce competition followed by rate reduction, the company could improve its brand image with best quality of service. Despite reduction in gross revenue, the profit after tax of the company has increased from 3.83% to 4.03% of gross revenue. The Company has recommended the payment of dividend ' 1.35 Crore for the financial year 2016-17 out of its net profit for the year.

MTML has earned a gross revenue of approx INR 971 million during the financial year as against INR 1,022 Million in the corresponding period of last fiscal year, thereby registering a fall of around 4.99%. The fall in the revenue is attributable to change in customer usage pattern with majority of customers using data for ILD calls as well as local calls and using chat applications instead of SMS etc., intense competition and saturated market. However the company could increase its net profit with precise management of available resources.

In the year 2015-16, the company had upgraded its entire network for high speed data services (HSPA ) and introduced LTE (4G) in some select areas. In 2016-17, MTML not only maintained its market share but added to customer base by introducing very attractive voice and data plans for existing as well as prospective customers. MTML made inroads in Enterprise Business solutions as well and could get a few dozen Enterprise customers in the year.

MTML is well established in Mauritius due to its innovative tariff structure and on the merit of its state of art technical offerings. The Company is always exploring new business possibilities and is looking to consolidate its position in the market on the basis of a strong 4G network.

All the expenses of the company are paid from its own internal resources. The CAPEX for procurement of equipments is totally met from its own internal resources. MTML is operating from its own building, constructed from internal resources, situated at 63, Cyber City, Ebene, Mauritius which is considered to be heart of IT hub in Mauritius. There is no debt liability on the company.

The company is managed by CEO, CTO, CFO and 9 more officers all on deputation from MTNL. Other operations are managed through outsourcing.

(ii) Millennium Telecom Ltd. (MTL)

Millennium Telecom Ltd (MTL) is a wholly owned subsidiary of MTNL. Services being offered by MTL include Telecom consultancy & engineering, Project Management, Wi-Fi solution, project on e-governance, Managed services, Turnkey ICT solution, capacity building and skill development etc.

Millennium Telecom Ltd (MTL) is also moving ahead with a very high growth rate.

In 2014-15, the company turned into profit by System Integration other ICT related works at Pan India level. MTL is in the process of winning over more orders in the upcoming years.

A large number of Govt. Institutions have awarded works on nomination basis, which have been successfully executed by MTL showcasing its understanding and capabilities. Customer list include National Highway Authority of India (NHAI), Air India, J & K Government, Central University-(Mahendragarh) Haryana etc. MTL is also expanding its portfolio of service for providing generalized as well customized solutions to suit government and semi government institutions.

MTL had invited EOI from interested parties for empanelment as Business Development Associates to assist MTL for implementation of innovative projects. 15 BDAs' have been empanelled till now.

Recently MTL has been awarded the work for GIS survey of Meerut and Ghaziabad worth Rs, 18.9 crore. MTL is also pursuing various new projects which are at different stages or consideration by Government Agencies.

(iii) MTNL STPI IT Services Ltd. (MSITS)

MTNL STPI IT SERVICES LTD (MSITSL) is a 50:50 Joint Venture company of Mahanagar Telephone Nigam Limited (MTNL) and Software Technology Parks of India (STPI).

In order to implement one of its objectives MSITSL has established the physical infrastructure of Tier III Data Center at Chennai on space taken on lease basis from STPI. The Data Center has server farm area of around 3500 sq. ft. and the total investment made in this regard is of Rs,477 lakhs. This Tier III Data Center is maintaining 99.98% uptime on 24X7 basis.

The commercial operation of the Data Center commenced in 2009. The Ministry of External Affairs (MEA) has hosted the Passport Seva Project at MSITSL Data Center through M/s TCS. The Directorate General of Employment & Training (DGE&T) in Ministry of Labour & Employment has hosted National Career Project through STPI at MSITSL Data Centre. Many IT/TES companies have also co-located servers and networking equipments in the MSITSL Data Centre.

MSITSL has earned the revenue for the period of 2009-10: Rs,196 lakhs, for the year 2010-11: Rs,296 lakhs, for the year 2011-12: Rs,303 lakhs, for the year 2012-13: Rs,367 lakhs, for the year 2013-14: Rs,404 Lakhs and for the year 2014-15: Rs,445 Lakhs. For the year 2015-16 : Rs,562 Lakhs. For the year 2016-17: 540 Lakhs.

(iv) United Telecommunications Ltd. (UTL)

UTL is an associate of MTNL which consists of TCL, TCIL, NVPL (Nepal) & MTNL and was set up in October, 2001. The company provides Mobile/ILD/data services in Nepal. Company is making losses and has a total customer base of approx. 5,96,008 as on 31st December, 2016.

UTL obtained Unified License from Nepal Telecommunications Authority (NTA), regulatory body of telecommunication market in Nepal, on September 5, 2016. This is a pan-Nepal license to operate any service - GSM, CDMA, ISP, NSP inside the territory of Nepal. Under implementation of the Unified License, UTL is planning to roll-out GSM network all over Nepal in different phases in addition to its existing network of almost 200 BTSs covering 44 out of 75 districts of Nepal. UTL has been negotiating with vendors and shall be finalizing and entering into agreements with respective vendors of supply and service of GSM systems, infrastructures, Billing, IN/VAS systems. UTL will be planning for effective roll-out of services in order to compete in the market at the earliest with an aim to penetrate the market from Day 1.

DETAILS OF SYSTEM STATUS FOR THE FINANCIAL YEAR 2016-17 (AS ON 31st MARCH, 2017)

Your Company has the following equipped and used capacity of Landline, GSM, Broadband etc. as on 31st March, 2017:-DETAILS OF SYSTEM STATUS FOR THE FINANCIAL YEAR 2016-17

S. No

Parameters

Delhi

Mumbai

Total

1

Number of Switches

342

260

602

2

Details of Capacity

-

-

-

2a

Fixed Phones

2416505

2586392

5002897

2b

GSM

2800000

2800000

5600000

2c

Broadband Capacity (in Ports)

788736

845908

1634644

3

DELs (including Fixed-Line, GSM and Broadband)

4506496

3692690

8199186

3a

Fixed Line

1601487

1860887

3462374

3b

GSM

2327203

1300117

3627320

3c

Broadband Subscribers

577806

531686

1109492

4

FTTH Subscribers

4572

4677

9249

5

ISDN

7870

12675

20545

S. No

Parameters

Delhi

Mumbai

Total

6

DLC (No.)

425

523

948

7

Tax Capacity

150000

115200

265200

8

Tandem Capacity

402500

363240

765740

9

Optical Fibre Cable

-

-

-

9a

OFC in Route Kms

9014.903

8177.62

17192.523

9b

OFC in Fibre Kms

282395.344

261771.550

544166.894

10

Leased Circuits

12598

18574

31172

HUMAN RESOURCE DEVELOPMENT

Your Company attaches the highest priority to the quality of intellectual capital at its disposal and believes that knowledge and skills of its employees are the key to achievements of its corporate mission. It has sound recruitment policy and comprehensive training system. During the past one year, your company has laid greater emphasis on Human Resources Development. We have been devoting substantial resources on building a skilled workforce that has a capability to counter threats posed by ever changing customer base. The Company has been conducting various training and development activities which apart from reorienting the employees towards the greater organizational purpose are also focusing on eliminating any skill gap and technical obsolescence. The management's view on training is one of development of employee's overall personality and enabling them in becoming a vital productive resource

TRAINING ACHIEVEMENTS

At present MTNL has two of its in house state of the art training centers, one located in New Delhi and other at Mumbai. The details of the achievement of training centers at Delhi and Mumbai respectively are given below:

(I) THE INSTITUTE OF TELECOM, TECHNOLOGY & MANAGEMENT (ITTM), NEW DELHI

The Institute of Telecom, Technology & Management, ITTM Shadipur, New Delhi is a state of the art training centre of MTNL, Delhi engaged in imparting induction training and short duration training to its officers and employees in the field of Telecom, IT, Computer system and Management. With impressive growth of Telecom sector in India, the requirement of telecom trained personnel is growing day by day. Realizing this ever growing demand for telecom personnel, ITTM started training engineering students also as part of their summer training. During the year 2016-17, ITTM has successfully trained 968 Executives with an achievement of 3889 Man days and 667 Non Executives with an achievement of 10774 Man days.

Industrial Training / Industrial visits for engineering and short term trainings for outside candidates on skill development were also successfully provided to 772 trainees of various engineering institutions and other students from various Government schools under NSQF (National Skills Qualification Framework) with an achievement of 11795 Man days.

Revenue earned at ITTM for the financial year 2016-17

Industrial Training/ Industrial Visits to Engineering Students = Rs, 43,81,590/Corporate Training to TCIL employees/ Short term courses on skill development = Rs, 3,04,953/Total Revenue Earned by ITTM by training outsiders = Rs, 46,86,543/Special training on “digital mode of payments” to promote the cashless transactions was organised at ITTM on 23/12/2016. It was inagurated by Hon’ble CMD Delhi and ED(Delhi) , GM(Fin) , GM(Trg) & other officers of MTNL were also present.

ITTM has the necessary infrastructure, technical and academic competence and excellence for providing training in specialized courses in the field of GSM, Broadband Technology, Switching, Transmission, External Plant, IT, Computer System, Management and various wellness programs.

(II) CENTRE FOR EXCELLENCE IN TELECOM TECHNOLOGY & MANAGEMENT (CETTM), MUMBAI

The Centre for Excellence in Telecom Technology & Management (CETTM) is ISO 9001-2008 certified Institute. Launched in 2004 this institution is imparting training in Telecom Technology and Management Studies to candidates across the globe. It has ERP based fully networked training center & Hostel for environmental friendly paperless working and is strategically located at Hiranandani Gardens, Powai, Mumbai, India.

CETTM has been instrumental in enhancing the skills & knowledge of MTNL employees which has translated into increased productivity and efficiency. During F.Y. 2016-17, 4892 personnel were trained including 1984 in-house personnel and 2908 external personnel and have registered an achievement of 25179 Trainee Days. A total of 274 Programs were conducted which included training programs on Broadband, FTTH, Mobile services, soft-skill development and mandatory courses for Financial up-gradation.

Under ITEC-SCAAP program, sponsored by MEA, Govt. of India, CETTM has successfully completed 09 courses in Telecom, IT & Management streams. A total of 315 foreign delegates from over 60 countries were trained.

As CSR activity 17 vacation courses for engineering college students were conducted during MAY & DEC 2016 in which 234 students were trained during summer and winter vacations. 2053 Engineering Students in F.Y.2016-17 were trained in various courses. 23 Cabinet Secretariat officers trained in various courses. CETTM has done MOU with Syncroute for providing Wireless 4G training and trained 41 students.

(III) SKILL DEVELOPMENT

With a vision of a Skilled India, Ministry of Skill Development & Entrepreneurship (MSDE) aims to skill India on a large scale with speed and high standards. Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is the flagship scheme that is driving towards greater realisation of this vision. MTNL have two training centre, one at Mumbai (CETTM) and another at Delhi (ITTM). Both of the training centers are engaged to meet the requirement of skill development and giving summer trainings to students of BE/ B.Tech. Short Term (One Day/ Two days) training programs for outsiders including students, housewives & others are also being conducted. To achieve the aim of skill development programme MTNL has signed MoU with Telecom Sector Skill Council & Global Institute of Skill Development. MTNL has also signed MoU with Gramin Vikas Trust (GVT) to run a training cum skilling center for promotion of entrepreneurship for the period of Five years. Under skill development programme MTNL has trained 3591 trainees in year 2016-17. MTNL is also in process of conducting Recognition of Prior Learning certification for all eligible MTNL employees.

INDUSTRIAL RELATIONS

Industrial peace and Industrial harmony is based on healthy Employee Relations and like the previous year, Employees Relations remained Cordial throughout the year. The Grievances/Issues raised by the employees/Union/Associations were given due attention and regard. The cases/issues brought up by them were settled through regular meetings and interactions between Management and Unions/Associations and action as mutually agreed was taken to settle them.

Further, MTNL was paying Pension to the absorbed employees for the service rendered in Govt. For the past few years MTNL was pursuing with Govt for settlement of the pension issue. The Pension issue is considered by the Govt and it has been decided that Payment of pensioner benefits to all categories of the erstwhile employees of the Govt (Gr A,B,C & D) absorbed in MTNL who have opted for pension on combined service is being made by Govt in the same manner as in BSNL w.e.f 01/10/2000.

EMPLOYEES’ WELFARE

Employees Welfare Schemes like subsidized Canteen, Housing, Medical facilities, Group Insurance, dormitories for females working in night shift etc. continued and maintained by the Company for its employees. Sports and Cultural activities were also given priority during the year.

Changeover of Contributory Group Health Insurance Scheme for retirees to CGHS- After pursuance of MTNL with DoT, Ministry of Health issued instructions to CGHS for enrolment of MTNL retirees (drawing Govt. Pension) in the CGHS. To facilitate the same an incentive is being provided to the retirees concerned. As on date approximately 2500 retirees in MTNL have benefitted from this scheme.

IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY

The Company continued its efforts to comply with statutory requirements in promoting the use of Hindi and has been able to achieve most of the annual targets set by the Government for implementation and promotion of Hindi as Official Language in the Company.

IMPLEMENTATION OF RESERVATION POLICY FOR SC/ST/OBC & PH COMMUNITY

Your Company has endeavored to fulfill all the statutory requirements with regard to implementation of reservation policy for candidates to SC/ ST/ OBC communities as well as Physically Challenged candidates.

IMPLEMENTATION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITITION & REDRESSAL) ACT, 2013

The Company has constituted an internal Complaint Committee on Prevention, Prohibition & Redressal of Sexual Harassment of Women at workplace and matters connected therewith or incidental thereto covering all aspects as contained in the Sexual Harassment of Women at workplace (Prevention, Prohibition & Redressal) Act, 2013. No complaint has been reported during the year under report.

WORKING CONDITIONS OF WOMEN EMPLOYEES

We are continuously striving towards gender sensitization amongst our employees. Special care has been taken in case of woman employees in night shifts. Also to redress the issues of Sexual Harassment at workplace, special cells have been constituted.

MANPOWER STATUS

As on 31st March, 2017 your company had a working strength of employees as per details given below:-

Group

Total Working

SC

ST

A

899

145

57

B

3026

434

73

C

16366

2636

284

D

7614

1915

552

Total

27905

5130

966

TSM

14

-

-

Grand Total

27919

5130

966

New Recruitment

In order to induct new blood into its working strength, the Board of Directors of your Company has approved to induct 100 officers at E-2 level in the stream of Telecom, Electrical, Civil, Finance, HR , Sales & Marketing.

The candidates for the post of JTO (Telecom/ Electrical & Civil) are selected under GATE-2015 score. '57' candidates were issued offer of appointment out of which '19' candidates including one PwD candidate joined induction training at CETTM, Mumbai. They are further posted in field training as per the MTNL rules.

The recruitment of non-technical posts viz. AM (Finance/ Mktg./ Legal/ HR) is under process.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has been suffering losses for the last few years and hence no CSR funds has been allocated/spent for CSR activities during the Financial Year. The provision of Section 135 of the Companies Act, 2013 are not applicable. However MTNL is undertaking non funding CSR activities like sending SMS to the public for spreading awareness on Swachh Bharat, Pulse Polio, other moves of the Government etc. For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which forms part of this Report. The Policy is available on the website of the company www.mtnl.net.in.

VIGILANCE

The Vigilance department of MTNL is headed by Chief Vigilance Officer. Presently Shri Deepak Kashyap, CVO, BSNL is looking after the charge of CVO, MTNL. The CVO is responsible for complete vigilance administration in MTNL.

During the year 2016-17, emphasis was laid on preventive vigilance and to enhance the awareness of transparency and accountability in working by carrying out various field inspections. System improvement advice were issued by Vigilance Unit for reconciliation of Sanchaar Haats products, store verification, optimum electrical load in various buildings, proper maintenance of broadband faults, BTS sites etc. CTE type inspections were also carried out as per CVC guidelines.

Further, training programmes/seminars on vigilance/complaints handling and disciplinary proceedings have been conducted during the period for the employees to make the participants understand the conduct rules of MTNL, procedure for handling departmental proceedings and improve their working efficiency.

As per CVC instructions, the Vigilance Awareness Week was observed from 31.10.2016 to 05.11.2016. During this week, various activities like integrity pledge taking, release of two booklets on (i) Public participation in promoting integrity and eradicating corruption” and (ii) book on vigilance and discipline with a focus on the subject Public participation in promoting integrity & eradicating corruption and containing the chapters on main function of vigilance, MTNL Conduct Disciplinary and Appeal Rules-1998 (Executive), Certified Standing orders for MTNL C & D Employees (Non Executives), Do's and Don'ts were distributed. Also quotations were displayed and lectures, seminar and workshop organized. Further, MTNL has started a newsletter titled 'CHETAN' which was released by CMD,MTNL during vigilance awareness week. This newsletter has detailed information regarding departmental inquiries and various vigilance activities carried by vigilance unit during year 2015-16.

Monthly vigilance/disciplinary meetings were held regularly at Delhi & Mumbai with concerned GM (Vigilance) team to review the status of the cases and expedite the same. Meeting with ED & CGM ( Delhi / Mumbai / Wireless Services) were also held to apprise them of the observations made during field inspections and different types of operational complaints received by Vigilance Unit. During these meetings, CVO emphasized for further improvement in customer services offered by MTNL by taking prompt action on customer's complaint and having customer-centric approach at all levels to enhance the credibility and brand image of the company in the minds of the customers.

INTEGRITY PACT PROGRAME WITH TRANSPARENCY INTERNATIONAL INDIA

MTNL has signed a Memorandum of Understanding (MOU) with Transparency International India (TII) for implementing an Integrity Pact Programme (IPP) focused on enhancing transparency in its business transactions, contracts and procurement process. Under this MOU, MTNL is committed to implementing the Integrity Pact in all its major procurement and work contract activities. Three Independent External Monitors being persons of eminence nominated by MTNL in consultation with Central Vigilance Commission (CVC), monitor the activities. The Integrity Pact has strengthened the established system and procedures by creating trust in various Stakeholders.

MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

No material changes and commitment affecting the financial position of the company occurred between the end of the financial year to which this financial statements relate and the date of the report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

The provision of Section 134(m) of the Companies Act, 2013 do not apply to the Company as your Company is a service provider. The total foreign inflow was '3.83 Crore and outflow was ' 3.10 Crore.

ENTERPRISE RISK MANAGEMENT

The Board of Directors of the Company has formed a Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The Audit Committee also has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The development and implementation of Risk Management Policy has been covered in the Management Discussion and Analysis, which forms part of this Report.

MEETINGS OF THE BOARD OF DIRECTORS

During the year under report, the Board of Directors of your Company met Ten times i.e. during the Financial Year 2016-17, 10 (Ten) Board Meetings were held. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013. Details of Board Meetings are given in Corporate Governance Report which forms part of this Report. At these meetings, the Board held intensive discussions on the budget, important financial transactions and various steps to face the impending competition from private operators both in Basic Telephone Service, Cellular Mobile Telephony and other value added services.

DECLARATION BY INDEPENDENT DIRECTOR

The Company has received necessary declaration from the Independent Directors i.e. from Shri Rakesh Nangia and Shri Ashok Mittal under Section 149(7) of the Companies Act, 2013 that they meets the criteria of Independence laid down in the Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (LODR), 2015.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

During the period under review, the Company has not entered with any Material Transaction with any of its related parties. The Company's major Related Party Transactions are generally with its subsidiaries and associates. All Related Parties Transactions were in ordinary course of Business and were negotiated on an Arm's Length basis and they were intended to further the company's interest. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of Companies Act, 2013 in Form AOC-2 is not applicable. Web link for Policy on Materiality of Related Party Transactions and also on dealing with Related Party Transactions has been provided in the Report on Corporate Governance which forms part of Annual Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

During the year, your Company has given a Corporate guarantee for '31,60,000 valid till 30th May, 2020 in favour of Central University Haryana, Mahendragarh on behalf of Millennium Telecom Ltd (MTL), a wholly owned subsidiary of MTNL for execution of a project by MTL.

During the Year there was no loan given or investments made by the MTNL under Section 186 of the Companies Act, 2013.

CORPORATE GOVERNANCE

Your Company follows the principles of effective Corporate Governance Practices. The Company has taken steps to comply with the requirements of SEBI (LODR) Regulation, 2015 which came into effect from 01.12.2015. Your Company has also complied with the Corporate Governance Guidelines enunciated by Department of Public Enterprises (DPE), Government of India for Central Public Sector Enterprises (CPSEs). MTNL is filing its reports, statements, documents in this regard with the NSE, BSE & OTCIQ on quarterly basis. A Report on Corporate Governance has been appended under the separate section titled Corporate Governance Report.

COMPLIANCE OF CORPORATE GOVERNANCE - CERTIFICATE FROM THE PRACTISING COMPANY SECRETARY REGARDING

A certificate from M/s V.K. Sharma & Co. Practicing Company Secretary, regarding compliance of conditions of Corporate Governance as stipulated under Schedule V (E) of SEBI (LODR), 2015 and DPE Guidelines is attached as an Annexure. COMPLIANCE OF DPE GUIDELINES & POLICIES

The Guidelines & Policies issued by the Department of Public Enterprises (DPE) from time to time are being complied with and implemented.

IMPLEMENTATION ON CIRCULAR ISSUED BY MINISTRY OF CORPORATE AFFAIRS ON “GREEN INITIATIVES IN CORPORATE GOVERNANCE”

The Ministry of Corporate Affairs, vide its Circular no. 17/2011 dated 21st April 2011 followed by Circular no.18/2011 dated 29th April 2011 has taken “Green Initiative in the Corporate Governance” by allowing paperless compliances by the Companies through electronic mode and introduced e-mail address as one of the modes of sending communication to the members. Also as per provision of Section 101 of the Companies Act, 2013, and rules made there under notice of meeting may be sent by electronic mode.

In accordance with the above circulars and to ensure compliance of Green Initiative, your Company has sent various documents including Notice of the 31st AGM, Audited Financial Statements, Directors' Report, Auditors' Report for the F.Y. 2016-17 etc. to its shareholders in electronic form, at the e-mail addresses provided / registered by members and made available to us by the Depositories (NSDL/CDSL). The members are advised to update by registering changes, if any, in their e-mail address, with the concerned Depository Participant.

Your Company shall also display full text of Notice of 31st AGM & Annual Report 2016-17 at its website www.mtnl.net. in and physical copies of such documents will be made available at the registered office of the Company for inspection by the members during office hours on all working days.

Your Company looks forward towards active participation of Shareholders in this “Green Initiative”.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, the Directors to the best of their knowledge and belief confirm that:

(a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis and

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating efficiently.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company had maintained, in all respects, adequate internal financial controls over financial reporting and such internal control over financial reporting were operating effectively during the financial year 2016-17, based on the internal control over financial reporting criteria established by the Company considering the essential components on internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. The Company has appointed M/s HDSG & Associates Internal Financial Control Consultants for reviewing, evaluating and identifying the existing MRCM and suggest establishment of effective Control System in MTNL for the FY 2016-17.

FIXED DEPOSITS

Your Company has not invited/ accepted any fixed deposits and, as such, no amount of principal or interest was outstanding as on the Balance Sheet date on this account.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURE

The provisions of Section 197(12) of Companies Act, 2013 read with Rule 5 of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 are not applicable to your Company as being a Govt. Company.

SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR 2016-17

M/s Hemant Singh & Associates, Company Secretaries, have conducted the Secretarial Audit of your company for the Financial Year 2016-17 under Section 204 of the Companies Act, 2013. The said Secretarial Audit Report and the replies to the observations of the Secretarial Auditors are given in as annexure.

EXTRACT OF ANNUAL RETURN FOR THE YEAR 2016-17 PURSUANT TO SECTION 92(3) OF COMPANIES ACT, 2013 (MGT-9)

Extract of Annual Return (in Form-MGT-9) of the Company is annexed.

AUDITORS QUALIFICATIONS AND MANAGEMENT REPLY THERETO

The replies to the observation of the Statutory Auditors for the Financial Year 2016-17 are given as annexure. The Comments of the Comptroller and Auditor General of India on the Financial Statements and the replies of the Management thereon are given in the annexure to the Directors' Report.

DIRECTORS & KEY MANAGERIAL PERSONNEL

The Board of Directors of your company has seven (7) members, three Functional Directors (including CMD), two Government Nominee Directors and two independent directors. List of present Directors of MTNL as on 10.08.2017 is given in the Corporate Governance Report.

During the period under report, the following changes took place in the Directorship/Key Managerial Personnel of Your Company:-

1. Shri N. K. Yadav ceased to be CMD w.e.f. 08.06.2016.

2. Shri P. K. Purwar was given additional charge of CMD w.e.f. 08.06.2016. Appointed as Regular CMD on 03.03.2017 and entrusted with additional charge of Director (Fin) on 03.03.2017.

3. Shri Sanjeev Kumar has been appointed as Director (Tech) w.e.f. 02.07.2016.

4. Smt. Simmi R. Nakra ceased to be Director w.e.f. 12.04.2016.

5. Ms. Tiakala Lynda Yaden has been appointed as Government Nominee Director in place of Smt. Simmi R. Nakra w.e.f 19.05.2016.

Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of your Company are:-

i) Shri P.K. Purwar, CMD & Dir (Fin)

ii) Shri Sunil Kumar, Dir (HR&EB)

iii) Shri Sanjeev Kumar, Dir (Tech)

iv) Shri S.R. Sayal, Company Secretary

AUDIT COMMITTEE

The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms part of this Report.

AUDITORS

(1) M/s. Kumar Vijay Gupta & Co., Chartered Accountants and M/s Mehra Goel & Co, Chartered Accountants have been appointed as Joint Statutory Auditors of your Company by the Comptroller and Auditor General of India for the Financial Year 2016-17 and the Board has already ratified their appointment.

(2) M/s R. M. Bansal & Co., Cost Accountants have been appointed as Cost Auditors of your company for carrying out audit under Section 148 of the Companies Act, 2013, for the cost records maintained under Section 209(1)

(d) of Companies Act,1956 and as notified under: (i) Cost Accounting Records (Telecommunications) Rules,2002 & (ii) Cost Audit Rules,2001. The Cost Audit Report alongwith the annexures for the Financial Year 2015-16 have been submitted to the Central Government in the Form I-XBRL format on MCA portal on 28/09/2016.

(3) M/s Hemant Singh & Associates, Company Secretaries have been appointed as Secretarial Auditors of your company for carrying out Secretarial Audit under Section 204 of the Companies Act, 2013 for the Financial Year 2016-17.

ACKNOWLEDGEMENT

Your Directors take this opportunity to gratefully acknowledge the help, guidance and support received from Deptt. of Telecom (DoT) and various Ministries of the Government of India. Your Directors are especially grateful to its Bankers, all stakeholders and investors including, ADR holders, for their continued patronage and confidence reposed in the company.

The Directors would like to express their thanks for the sincere hard work and dedicated services rendered by every employee of the company. The Board is confident that with the employees' continued enthusiasm, initiative and dedicated efforts, your company could face the new challenges and opportunities arising out of the resultant competition from private operators in the Cellular Mobile, Basic Telephone, Internet services and other Value Added services.

For and on behalf of the Board of Directors

sd/-

(Shri P.K. PURWAR)

CMD & DIRECTOR (FIN)

PLACE: NEW DELHI

DATE: 03/08/2017