Mail Stop 4-7
March 31, 2005
R.C. Sen
Deputy General Manager (Accounts)
Mahanagar Telephone Nigam Limited
12th Floor, Jeevan Bharati Tower-1
124 Connaught Circus
New Delhi 110 001
India
Re: Mahanagar Telephone Nigam Limited
Form 20-F for the fiscal year ended March 31, 2004
Filed Sept. 30, 2004
File No. 1-15252
Dear Mr. Sen:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. As such, all persons who are responsible for the
adequacy
and accuracy of the disclosure are urged to be certain that they
have
included all information required pursuant to the Securities
Exchange
Act of 1934. Please comply with these comments in future filings
and
provide us written responses as appropriate.. If you disagree, we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 20-F for the fiscal year ended March 31, 2004, filed
September
30, 2004
Legal Proceedings, page 31
1. We note in seventh paragraph that you have not accrued for the
income tax charge, interest and penalty of approximately Rs.33
billion on the disallowable license fees. Please tell us in
detail
in your response letter how you met the requirements of paragraph
8
of SFAS no. 5. Please refer to FASB Interpretation no. 14 which
provides for additional guidance on SFAS no. 5.
Item 5. Operating and Financial Review and Prospects
Critical Accounting Policies and Estimates, page 43
2. We believe that your disclosures, with respect to critical
accounting policies, do not provide investors with an
understanding
of those estimates and assumptions that are both important to the
portrayal of your financial condition and results of operations
and
require your most difficult, subjective or complex judgments. For
the most part, the current disclosure is identical to the
disclosure
presented in Note 2 - Summary of significant accounting policies,
appearing in the notes to the financial statements. Please
revise.
3. None of the critical accounting estimates that you include in
your
current disclosures includes a sensitivity analysis or other
quantitative information. Revise your disclosures to include a
sensitivity analysis and other quantitative information when it is
reasonably available. You should address the questions that arise
once the critical accounting estimate or assumption has been
identified by analyzing, to the extent material, such factors as
how
they arrived at the estimate, how accurate the estimate/assumption
has been in the past, how much the estimate/assumption has changed
in
the past, and whether the estimate/assumption is reasonably likely
to
change in the future. For example, you should expand the
disclosure
of your accounting for pension and other retirement benefits and
legal contingencies to provide more specific disclosures.
For additional guidance, refer to Item 5 of Form 20-F as well as
section V of SEC Release No. 33-8350 (December 19, 2003),
Commission
Guidance Regarding Management`s Discussion and Analysis of
Financial
Condition and Results of Operations, which is located on our
website
at http://www.sec.gov/rules/interp/33-8350.htm.
Results of operations, page 48
4. Your present discussion of the costs of revenues and selling,
general and administrative expenses on pages 48 and 49 does not
address changes in each material component of these line items.
Please revise your present disclosure to discuss the changes in
each
material line presented on page F-4. In circumstances where there
is
more than one business reason for the change, you should attempt
to
quantify the incremental impact of each individual business reason
discussed on the overall change in the line item. Please comply
with
Item 5 of Form 20-F. Also, refer to SEC Release No. 33-8350.
Item 15. Controls and Procedures, page 79
5. We note your disclosure that "our disclosure controls and
procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed
by
us in the reports that we file or submit under the Securities
Exchange Act." Please confirm in your response letter, if true,
that
your officers concluded that your disclosure controls and
procedures
are also effective in ensuring that information required to be
disclosed in the reports that you file or submit under the
Exchange
Act is accumulated and communicated to your management, including
your principal executive and principal financial officers, to
allow
timely decisions regarding required disclosure. See Rule 13a-
15(e)
of the Securities Exchange Act. Alternatively, you may simply
state,
if true, that your chief executive officer and chief financial
officer concluded that your disclosure controls and procedures are
effective. Additionally, please comply with this comment in
future
filings.
6. We note your disclosure that "our chief executive officer and
chief financial officer have concluded that, as of the end of such
period, our disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely
basis,
information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act." We also note
that
your quarterly financial statements furnished on Forms 6-K include
review reports that note possible discrepancies from Indian GAAP.
Please tell us in your response letter what consideration your
officers gave to these review reports in their evaluation of your
disclosure controls and procedures and in reaching their
conclusion
that your disclosure controls and procedures were effective. In
this
regard we note the following reports:
* Annexure 1 to the review report for the financial statements for
the three months ended September 30, 2004, filed on Form 6-K filed
December 1, 2004;
* Annexure 1 to the review report for the financial statements for
the three months ended June 30, 2004, filed on Form 6-K filed
August
31, 2004;
* Annexure A to the review report for the financial statements for
the three months ended December 31, 2003, filed as Exhibit 99.5 to
Form 6-K filed February 27, 2004; and
* Annexure A to the review report for the financial statements for
the three months ended September 30, 2003, filed on Form 6-K filed
December 3, 2003.
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm, page F-2
7. Based on the PCAOB`s listing of the registered firms as of
February 3, 2005, we note that your auditors - Price Waterhouse,
in
New Delhi, India - are not a registered member of PCAOB. Please
advise us in writing of the status of your auditors to practice
before the Commission.
Statements of Operations, page F-4
8. We note that your presentation of cost of revenues excludes
depreciation and amortization for property and equipment that is
directly attributable to the generation of revenue. It is not
appropriate to present gross profit that excludes depreciation,
since
this results in presenting a figure for income before
depreciation,
which is prohibited by SAB 11:B. Please revise your income
statement
presentation and other related financial information in future
filings to include depreciation expense in the calculation of
gross
margin.
Consolidated Statements of Cash Flow, page F-6
9. Please tell us in your response letter the nature of the line
item
"Excess liabilities written back."
Notes to the Consolidated Financial Statements
Note 25(b). Contingent Liabilities - Sales Tax, page F-26
10. We note that the financial statements do not include the
accrual
for the sales tax liabilities. Please tell us in your response
letter how you evaluated the requirements of paragraph 8 of SFAS
no.
5 with respect to the sales tax liabilities. Also, refer to FASB
Interpretation no. 14 which provides for additional guidance on
the
application of SFAS no. 5.
* * * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
response letter confirming that you will comply with these
comments
in future filings as appropriate, keying your responses to our
comments and providing any requested supplemental information.
Detailed response letters greatly facilitate our review. Please
submit your response letter as correspondence on EDGAR. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Gopal Dharia, Staff Accountant, at (202)
942-
1973 or Terry French, Accountant Branch Chief, at (202) 942-1998
if
you have questions regarding comments on the financial statements
and
related matters. Please contact Daniel Zimmerman, Staff Attorney,
at
(202) 942-1933, Kathleen Krebs, Special Counsel, at (202) 942-
1990,
or me at (202) 942-1990 with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Mahanagar Telephone Nigam Limited
March 31, 2005
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