Market Strategy

52-WEEK FLOP: MTNL

K. Venkatasubramanian | Updated on June 16, 2012 Published on June 16, 2012

The stock of MTNL - a state owned telecoms company, has been beaten down over the past couple of years now and more severely in 2011-12.

In FY12, the company's revenues fell 8.3 per cent over the same period in the previous fiscal to Rs 3,369 crore, while net losses widened by 43.2 per cent to Rs 4018.5 crore.

The company's profits have been hit hard in part due to a heavy wage burden. Increase in salaries, provisions and actual payment of retirement benefits have hit MTNL hard, leading to losses. The company is also grappling with decline in subscriber and revenue market share.

Players such as Bharti Airtel, Vodafone and Idea Cellular have surged ahead in both the above parameters. The competitive intensity on mobile tariffs over the past couple of years has also caused margin pressures.

With MTNL's landline business too falling behind in revenues and the segment itself witnessing decreasing interest, driving growth has been challenging for the company.

The company had also won 3G and broadband wireless spectrum auctions for Mumbai and Delhi. This collectively involved an outgo of over Rs 11,000 crore.

Across operators, 3G services haven't taken off as expected and many players have reduced tariffs on such offerings.

In this light, it remains to be seen if the heavy investment that it has made would pay off for MTNL, especially in light of competitive constraints on tariffs.

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