A Distress Call

Updated: Jan 26 2003, 05:30am hrs
Mahanagar Telephone Nigam (MTNL) has fared poorly during the third quarter to December 2002 as it posted a 11.3 per cent drop in income from services to Rs 1,463.2 crore.

This has knocked off 34 per cent from its bottomline to Rs 217 crore. MTNLs current performance shows severe impact of internecine competition in all segments - fixed line, cellular and the Internet- from private players in the telecom sector. The poor performance has pulled the MTNL scrip down to Rs 85.

More and more players have been forced to slash tariff rates owing to growing competition in the telecom sector. BSNL, the national long distance service provider slashed its STD call rates by 62 per cent in response to a similar step from private players. Lower tariffs have made consumers happy. But service providers are now in a fix to stay in competition.

That is one reason why MTNL and BSNL that control more than 98 per cent of the domestic telephony market had to rework their revenue sharing arrangement. Earlier, the company used to keep a bulk of NLD, ILD and Local call revenues. Now it has to pay more to BSNL. More than 45 per cent of MTNLs revenue comes from NLD and ILD.

Recently, MTNL has also slashed PSTN call charges by 50 per cent to access the Internet during 10:30 pm to 06:30 am. Consequently, its operating income has come under pressure.

A slew of agreements between different service providers for interconnectivity seems to have worked in MTNL favour though the company has witnessed 21 per cent drop in revenue share to Rs 187.7 crore.

Its share in income from operations has come down to 12.8 per cent from 14.3 per cent in the corresponding quarter last year. However, this has been worked out on the formula applicable to various operators and the finalisation of interconnection agreement with BSNL is still pending.

On the other hand, 4.8 per cent increase in staff cost to Rs 374 crore and 14 per cent rise in licence fees continues to affect operating profits. An 8.2 per cent decline in operating expenses at Rs 951 crore could not prevent operating profit from falling by 16.5 per cent to Rs 512 crore. OPM fell to 35 per cent (37.2 per cent).

MTNL has been benefiting from its presence in Mumbai and Delhi.

The company, by virtue of being a major player in Mumbai and Delhi, has about 13 per cent market share of the national telecom network, with a customer base of more than five million lines. Its cellular business is showing signs of improvement with a rise in customer base.

The segment accounts for 2.4 per cent in total income. It contributed close to five per cent in PBDT. Revenue from fixed line continues to be higher at around 95 per cent plus.

However, cellulars have clocked a 100 per cent plus growth. This has caused fear that wireline additions will fall in the near future.Then there is some anxiety on account of an impending pressure in the emergence of low cost WLL(M).