X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
MTNL: A long wait - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 20, 2001

    MTNL: A long wait

    Mahanagar Telephone Nigam Limited (MTNL), the state owned basic service provider in Mumbai and Delhi is one of the top losers on the bourses over the last one year. The scrip has fallen from Rs 250 in June 2000 to Rs 130 in June 2001, a fall of 48% or a loss of Rs 75 bn in market capitalisation.

    The underlying reason behind this sharp fall on the bourses is the concerns regarding the growth prospects of the company. As MTNL operates in two of the highest tele-density circles in India (approximately 12% as against the national average of 2.7%), subscriber base is not expected to report any sharp upward trend, keeping in mind the competition factor. But against expectations, MTNL reported a sharp 10% growth in revenues to Rs 57,320 m in FY01. The reductions in long distance telephony tariffs and fall in registration costs augured well for the company.

    To boost topline, the company ventured into cellular telephony in 4QFY01. Though the initial response to its service was encouraging, as expected, MTNL has failed to deliver on the services front. The company also lost its competitive advantage in terms of lower airtime charges. The private operators lowered airtime rates as soon as MTNL fixed its tariff structure.

    But since MTNL provides basic service in Mumbai and Delhi circles that accounts for a significant portion of the NLD traffic, the company benefits from lower revenue share. Also, MTNL has a clear advantage in terms of last mile connectivity in two of the most lucrative circles in India. With basic subscriber base of more than 4 m, MTNL can always leverage this to provide other value-add services. But the company’s aggressiveness on the ISP front is far from encouraging.

    Value-added services constitute just 0.5% of turnover (even after including other services like telex and circuits, it is just 5% of turnover). Even if one were to assume a 100% growth in these services, they are not expected to boost sales of the company significantly in the coming years.

    It is a well-known fact that basic telephony alone cannot be a growth driver for telecom companies in the long run. Though MTNL seems to have realized this, there exists a big gap between planning and execution. This is where private operators stand out and giants like MTNL, which suffer from lower productivity and government control, lose out despite a strong infrastructure. This is reflected in the valuations of the company.

    The scrip is currently trading at Rs 130, at a P/E multiple of 5.1x the FY01 earnings. With disinvestments almost at halt, the better days for MTNL seem like a long wait.

     

     

    Equitymaster requests your view! Post a comment on "MTNL: A long wait". Click here!

      
     

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MTNL SHARE PRICE


    Aug 17, 2017 (Close)

    TRACK MTNL

    MTNL 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE MTNL WITH

    MARKET STATS