With the Indian telecom industry reaching hypercompetitive levels, consolidation was inevitable. As such, several private players have merged with other companies or restructured themselves to revive operations. State-run operators Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) too have been struggling to keep pace with the rapidly changing telecom scenario and declining profitability. While BSNL has been exhibiting some signs of revival, MTNL continues to remain in the red.
MTNL’s downward spiral began several years ago, in 2009-10. In 2009, MTNL accounted for around 71 per cent and 60 per cent of the fixed line market in Mumbai and New Delhi respectively. It also had approximately 17 per cent share in the burgeoning wireless market. However, growing competition, falling tariffs and the launch of new and innovative wireless and wireline technologies by rival operators took a toll on the operator. It continuously lost subscribers, both wireless and wireline, as market share. As of December 2017, MTNL accounted for a meagre 14.53 per cent and 0.31 per cent of the wireline and wireless markets respectively. Furthermore, MTNL has been struggling with quality of service issues. The low morale among employees has translated into negligence in the company’s day-to-day operations due to which customer service has been adversely impacted. In fact, customer dissatisfaction is one of the key reasons for the subscriber churn in MTNL. MTNL lost 6,561 wireless and 10,280 wireline customers in December 2017.
MTNL’s has been incurring losses for the past five fiscals owing to huge spectrum-related payouts, the increasing burden of employee remuneration and declining average revenue per user. The company’s operating income declined by 15.94 per cent from Rs 6.9 billion during the quarter ended December 2016 to Rs 5.8 billion during the corresponding quarter in 2017. Meanwhile, its wireless revenue declined by 50.40 per cent from Rs 1.23 billion to Rs 0.61 billion during the same period. However, it reduced its net loss, from Rs 8.19 billion during the quarter ended December 2016 to Rs 6.39 billion during the quarter ended December 2017.
Despite these challenges, MTNL remains upbeat about achieving a turnaround. To this end, it is taking several initiatives to improve its financial performance and achieve operational efficiency. In a bid to augment its revenues, the operator decided to monetise its real estate properties in Delhi and Mumbai. Further, in December 2017, it formulated a transformation plan with a total outlay of Rs 42.4 billion. Of this, Rs 21 billion will be spent on improving its mobile business and Rs 21.4 billion on revamping its wireline network to bring it on par with its competitors. As part of the plan, MTNL plans to install 2,000 3G base transceiver stations (BTSs) and 1,000 4G BTSs each in Delhi and Mumbai. In addition, MTNL is planning to revive its broadband business by launching fibre-to-the-home services.
Industry analysts also believe that a merger between MTNL and BSNL could be a viable way out. However, the question arises, should BSNL, which has been improving its financial performance, undertake the financial commitments of MTNL, which has been bleeding money?
The way forward
MTNL was established at a time when the telecom sector was at a nascent stage of development and service provision could not be entrusted solely to private players. However, with the entry and subsequent dominance of private players, it is now being argued that there may no longer be a need for the state-run operator to provide services in the two metros.
Successive governments have been hesitant to tackle the politically sensitive issue of MTNL’s divestment or sale, primarily owing to the expected opposition from its huge employee base. In January 2018, the telecom minister stated that the government is seriously considering a revival plan for MTNL. It would be interesting to see how the year pans out for the company.