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MTNL: Struggling to achieve a turnaround

December 02, 2016

MTNL: Struggling to achieve a turnaround

While Bharat Sanchar Nigam Limited (BSNL) is exhibiting signs of revival, the other state-run operator, Mahanagar Telephone Nigam Limited (MTNL), continues to remain in the red. The latter has been running in losses since 2009-10, except for 2013-14 when it posted a profit of Rs 78.25 billion. Even this one-time profit was not a sign of improved performance, but the result of government support in the form of a write-back of provisions for pension liabilities and spectrum amortisation costs.

In 2015-16, MTNL posted a consolidated loss of Rs 20.12 billion as against a loss of Rs 29.01 billion in 2014-15. This reduction in losses was achieved on the back of a decline in expenditure, from Rs 53.27 billion in 2014-15 to Rs 51.67 billion in 2015-16. Meanwhile, the operator’s income from operations declined from Rs 34.94 billion to Rs 33.03 billion during the same period.

MTNL’s dismal performance over the years has been on account of growing competition, decreasing tariffs, significant spectrum-related payouts and high burden of employee remuneration. Further, poor service quality has resulted in a steep decline in subscriber numbers. The network test report released by the Telecom Regulatory Authority of India (TRAI) in June 2016 showed MTNL plunging on all service quality parameters.

Owing to the operator’s weak financial health, there is often talk of the government considering shutting down or restructuring the state-owned telecom firm. However, NITI Aayog, which has been tasked with streamlining the process for the revival and restructuring of sick/incipient and weak public sector units, has said that there is no such proposal for disinvestment, strategic sale or closure of MTNL as of now.

MTNL, on its part, is bullish about achieving a turnaround and has taken several significant initiatives in the past few months to this end.

Recent initiatives

The company has taken several measures to bring more customers on board and improve its operational efficiency. For instance, in the wireless segment, it has introduced free incoming on national roaming for customers.  To help revive its wireline segment, MTNL, like BSNL, has introduced free night calling facility for landline customers for local calls to any network in Delhi and Mumbai between 10 p.m. and 7 a.m. Further, the local call pulse rate has been made applicable to STD calls between 10 p.m. and 7 a.m. for landline customers. The operator has also introduced a “Jodi Plan”, which enables its mobile customers to make local calls to one MTNL landline number and one MTNL mobile number at a reduced rate of Re 0.20 per minute.

In order to avoid frequent disruption in its landline services, MTNL has started replacing its copper cables with optical fibre. This, as per the operator, will not only stop cable theft but will also improve service quality.

With a view to increase the uptake of its broadband services, MTNL has upgraded the minimum speed under all its broadband plans to 2 Mbps. Further, it has launched a trial 2 Mbps broadband plan with free one-month usage from the date of installation for existing landline subscribers. It has also launched an attractive fibre-to-the-home (FTTH) broadband plan offering 10 Mbps speed and a fair usage data download limit of 25 GB at a monthly service charge of Rs 790.

Further, in July 2016, MTNL partnered with digital entertainment provider Hungama to offer on-demand entertainment services to its subscribers. As per the agreement, Hungama’s content, comprising over 3 million pieces including films, a music library with Indian and international content and games, will be available to MTNL broadband consumers in Mumbai and Delhi through various entertainment packages. In a bid to streamline its payment process, MTNL has recently partnered with digital wallet company Freecharge to provide a swift and secure option for cashless payments of MTNL bills in Mumbai. Freecharge will also offer features like auto-enrol and bill reminders.

MTNL has also launched an online testing tool, called IPTESTER, for monitoring the status of base transceiver stations/Node B equipment and broadband equipment on a real-time basis. Further, in 2015-16, about 108 digital subscriber line access multiplexers were redeployed near subscriber premises in Delhi and 100 in Mumbai, thereby reducing copper length and enhancing the quality of broadband service. MTNL’s efforts to achieve better operational efficiency has helped improve customer experience and reduced the number of complaints.

Exploring new avenues

MTNL has been actively exploring new avenues to improve its revenues. For instance, it is executing the Mumbai city surveillance project with L&T Infrastructure. The project is worth Rs 2.81 billion and involves the installation of 6,000 cameras at 1,500 locations in the city. The first phase of the project has been completed with the installation of 1,235 cameras. MTNL has also established two state-of-the-art Tier III data centres at Worli and Belapur in Mumbai for collocation of equipment for this city surveillance project.

MTNL has been entrusted with the task of deploying FTTH and Wi-Fi services at the residences of 790 members of Parliament in Delhi.  As of now, 731 FTTH connections have been provided and physical installation has been completed for Wi-Fi services at 587 residences. In addition, MTNL, along with BSNL, has signed a deal with the tourism ministry to equip 100 tourist destinations with high speed Wi-Fi facility by creating public Wi-Fi hotspots. The agreement will be valid for seven years, with the tourism ministry bearing the operational costs for the first three years.

The operator had earlier won a five-year contract from Oil and Natural Gas Corporation Limited to provide basic telephony and mobile services, and leased circuits including VSAT services in Mumbai and Delhi.

Future plans

Notwithstanding its current financial health, MTNL has major plans for the future. It plans to invest Rs 25 billion over the next two to three years for expanding and upgrading its network.

Unlike private telecom operators that are banking on 4G services to tap the growing data market, MTNL plans to focus on FTTH services and upgradation of its existing 3G infrastructure. The company is targeting to connect about 150,000 buildings in Delhi and Mumbai with optic fibre in the next two years. It plans to offer FTTH services in partnership with private firms on a revenue-sharing basis. These private partners could be cable operators or system integrators. Under these partnerships, MTNL will bring optic fibre to the premises of a building while the private partner will extend the service to the user’s home. The private entity will also be responsible for fault repairs and customer support.

Meanwhile, the operator is already in the midst of a 3G capacity expansion programme, following which the speed on MTNL’s 3G network is expected to reach 21.1 Mbps from the current 3.6 Mbps. MTNL will add about 2,000 new sites for 3G services in both its circles.

While the much-talked-of merger with BSNL is unlikely to happen any time soon, MTNL is looking at partnering with BSNL for running its mobile business. Under the proposed partnership, BSNL will provide equipment for MTNL’s mobile services in the Delhi and Mumbai circles and act as a managed service provider on a revenue-sharing basis. This seems justified given the fact that of MTNL’s total loss of around Rs 20 billion, about Rs 18 billion is from mobile services, which accounts for only 15 per cent of MTNL’s revenue. The move to transfer its wireless operations to BSNL will thus help it focus more on its wireline segment and drive future growth.

With these initiatives, MTNL expects to post operational profits in 2016-17 and turn fully profitable in 2017-18. However, this would require MTNL to usher in operational and financial efficiency. Going forward, service quality will be the key to MTNL’s future growth.

 
 

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