K.Venkatasubramanian | Updated on February 19, 2011


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The stock of PSU telecom player — MTNL, has been marked down quite severely as competitive pressures, staff costs pertaining to retirement and heavy payouts for 3G and BWA auction have curtailed margins.

In FY-10, revenues for the company fell 18 per cent over the previous fiscal to Rs 3,656.1 crore, while from being profitable, the company slipped deep into losses.

In the nine months of the current fiscal, revenues registered a mild growth of 4.4 per cent, but due to heavy payouts mentioned earlier, the losses have increased over the previous year.

MTNL, which operates in the lucrative circles of Mumbai and Delhi, has seen ARPU (average revenue per user) slipping in its wireless, landline as well as broadband segments. Landline ARPUs have steadily declined 2-3 per cent over the past several quarters to Rs 509. The wireless segment has seen ARPU (Rs 255) erosion of 5-8 per cent for the past 3-4 quarters. This, as competitive intensity reached its heights with the existence of as many as 14-15 operators in each circle coming about over the past year.

The company also won 3G and broadband wireless spectrum auctions for Mumbai and Delhi which collectively involved an outgo of over Rs 11,000 crore. These apart, significant outflow and provisions on employee retirement benefits too dented margins.

In recent times, a proposal to levy one-time charges on excess spectrum too has acted as a deterrent and dragged the stock down.

Published on February 19, 2011

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