The high-performing telecom company is looking to consolidate its position and become a global operator.
TELECOM infrastructure development has a positive and significant effect on the economic growth of a country. Mahanagar Telephone Nigam Limited, which is all set to become the first service provider of 3G services, has proved this point beyond doubt. The extent of the public sector telecom companys penetration is evident from its strong financial structure and infrastructure. That MTNL will surpass other operators in the market appears quite credible. The company, which was created in 1986 to upgrade the telecom services in Delhi and Mumbai, has shown consistent improvement in performance over the years. As on March 31, 2008, its impressive financial profile comprised a paid-up capital of Rs.630 crore, reserves and surplus amounting to Rs.11,290 crore and fixed assets worth Rs.6,319. 8 crore.
What is interesting is that around Rs.1,000 crore has already been spent on upgrading the infrastructure and around Rs.560 crore has been invested in anticipation of tripling the gains.
MTNL operates in Nepal through a joint venture called UTL (United Telecom Limited) and in Mauritius through a 100 per cent subsidiary called MTML (Mahanagar Telephone Mauritius Limited). MTNL and Software Technology Parks of India (STPI) have joined hands to set up a data centre for data-farming applications through a 50:50 joint venture called MTNL-STPI Ltd.
Through the restructured Millennium Telecom Limited (MTL), MTNL is executing a submarine cable system from India to South-East Asia and West Asia with the aim of onward connectivity to Western countries.
At its 22nd annual general meeting held on September 26, 2008, MTNL approved payment of final dividend at the rate of 40 per cent (including 30 per cent interim dividend), amounting to Rs.252 crore, on the paid-up equity capital of Rs.630 crore for the financial year 2007-08.
It paid dividend at the rate of 40 per cent on its equity capital last year. During the past eight years, an aggregate amount of Rs.2,173.50 crore has been paid as dividend to shareholders, of which Rs.1,222.52 crore has been paid to the Government of India, which holds a 56.25 per cent share in the company.
As on September 30, 2008, MTNL had 36,77,782 GSM mobile subscribers and 6,03,405 broadband subscribers. The company does not face any competition in fixed-line connections and has a whopping number of 37,19,687 subscribers. There has also been a significant growth in the subscriber base of videophone calling services on Internet Protocol Television (IPTV) and Voice over Internet Telephony (VoIP) in both Delhi and Mumbai. MTNL is making all efforts to provide state-of-the-art services to its customers at the most affordable rates.
The company was listed on the New York Stock Exchange in November 2006, one more connection that brings more transparency in its operation. Foreign institutional investors, Indian financial institutions, research analysts and merchant bankers consider the companys equities a good buy. The Bombay Stock Exchanges record of MTNL shares from April 2007 to March 2008 shows a considerable stability in their prices, with the average price being around Rs.160. MTNLs customers and shareholders can very well rely on the efficiency and management of the company.
However, the company showed a decline in the profit margin in the last working year. R.S.P. Sinha, Chairman and Managing Director, MTNL, told Frontline that this was mainly owing to a reduction in tariff and the increasing cost of labour maintenance since wage scales had shot up. He maintained that the dip in profit was not worrisome as the management was working towards a reorientation of policies and with increasing customer base, the profit was bound to go up.
The 3G services, which is set to bring high-speed Internet connectivity to palmtop users, is seen as a watershed in the history of technological development in India. Sinha said: As we are the market leader in providing affordable services, the 3G services will also be affordable in a price-conscious market. The market and consumer enthusiasm indicates a major increase in our revenues. Broadband and IPTV will also contribute significant revenues to our kitty.
MTNL functions in the most transparent manner. The company has been following the principles of corporate governance. As it is understood, the principles of corporate governance deal with laws, procedures, practices and implicit rules that determine a companys ability to take informed managerial decisions vis-a-vis its stakeholders, in particular its shareholders, creditors, customers, the state and its employees.
At present, the MTNL Board comprises four non-executive directors, apart from three full-time directors. There are two government nominees on it. Annual plans, revenue, capital budgets, manpower and overhead budgets, internal audit reports and manpower requirements are discussed at the board meetings regularly. A separate internal audit group has been formed for the company.
Apart from this, the company is subjected to government audits and other audits/examination by parliamentary committees.
The company has to report its monthly, quarterly and annual achievements in terms of financial and physical parameters to the Department of Telecommunications and the Department of Public Enterprises. MTNL, a debt-free company, has a unique record of servicing its shareholders. It has evolved its own Insider Trading Code as per the Securities and Exchange Board of Indias rules and regulations.
MTNLs first task, in this era of competition, was to clear the long waiting list for connections and replace its obsolete equipment and network. The companys modernisation, which has been going on since 2005, has had a salutary impact on the fault repair service (FRS).
In the past, faults used to occur frequently and it took a long time to rectify them. This was because of the paper-core-based network and the construction practices that were in vogue at that time.
For instance, connections were given by taking drop-wires from distribution points (DPs) mounted on poles. These poor-quality wires were used without proper accessories. Other practices, such as installing a number of poles in the same place, interconnected through pipes, providing multiple main distribution frames (MDFs) in the same building and laying underground cables for up to 20 kilometres, especially in the outlying areas, also contributed to frequent faults.
All these are now things of the past. Steps have been taken to create poleless networks, install new remote subscriber units (RSUs) and digital loop carriers (DLCs), phase out paper-core underground cabling, replace E 10B exchanges with new technology exchanges, and introduce a centralised network management system. The digitalisation of lines has been completed.
Among others, Wireless in Local Loop (WLL) and DLC systems have been introduced in the customer access network to ensure better performance. The managed leased data network (MLDN) system has been introduced to improve the performance of leased circuits. All these measures have brought down the fault rate and improved the FRS in recent years.
While network modernisation has helped MTNL meet the demand for new connections and improve post-connection services, diversification of services has helped it meet the competition from private operators.
Realising that provision of a basic telephone service through a fixed landline would not be enough to survive in the new environment, MTNL has introduced many innovative value-added services to keep its existing customer base intact and attract more subscribers.
The state-of-the-art Integrated Subscriber Digital Network (ISDN) enables a subscriber to connect nationally and internationally with all other analogue subscribers via the fast-track super communication highway. The ISDN line has certain advantages over the ordinary phone line. It helps the subscriber establish calls simultaneously voice, data, image or a combination of any two. An ISDN Primary Rate Access (PRA) subscriber can make 30 individual voice/data calls simultaneously.
With its vision to become a global telecom company and find a place on the Fortune-500 list, MTNL is looking to consolidate its position. Given its growth rate, this vision should not take long to materialise.