MTNL lays out plans for future growth

According to newspaper reports, Mahanagar Telephone Nigam Limited (MTNL) has decided to venture into telecom software by acquiring stakes in software companies. The company is also planning to enter into tie-ups with leading portals for developing content for its Internet sites and offering e-commerce related services. MTNL (FY99 Revenues: Rs 52.47 bn), a public sector company, is a franchise of the Department of Telecom. The company has a 15-year telecom license to operate in New Delhi and Mumbai until the year 2013.

MTNL has seen its topline growth slow down in view of the imposition of lower tariff rates by the Telecom Authority of India. Apart from that, the company has also been facing competition from private basic cellular telephony operators in Bombay. These factors have led to some concerns regarding the company's basic operations even as its Internet operations continued to perform well.

The company's decision to venture into telecom software and enter into tie-ups for content is a step in the right direction. The company would be able to save considerable amount of time by acquiring stakes in software companies rather than starting from scratch. Moreover, telecom software has tremendous potential in India given the low levels of telecom penetration and outdated technology in that is in use.

MTNL has also decided to source content for its Internet portal from external sources. The step is necessary as the company's core competence lies in technology rather than in developing content. The e-commerce foray will also help the company establish its Internet operations.

Finally, the company is considering venturing into domestic long distance telephony services. Given the company's experience in operating in the domestic markets and its existing infrastructure, the move is in the right direction and will help the company to rev up growth while at the same time making it telecom operations more integrated. MTNL seems to have a lot on its plate as of now. Whether MTNL can execute these plans and that too without government interference is what will determine its future prospects.

Market View:
MTNL has been rated as a 'BUY' by most analysts on account of its recent thrust in o Internet and software related activities. However the company's large work force and government control continue to be a source of concern to some.