MTNL vs Bharti Tele - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

MTNL vs Bharti Tele

Jul 29, 2003

MTNL is the largest player in basic telephony in Mumbai and Delhi whereas Bharti Televentures is the market leader in the cellular segment. Bharti operates in 15 circles of the total 22 circles. Though these companies are not strictly comparable as MTNL has a head start, but we are attempting to strike a comparison between the two as Bharti is fast moving up the ladder. The table below brings out the difference between the two companies. While MTNL’s net profit margin is on the decline, Bharti’s losses continue to reduce on the back of rising revenues. MTNL has not yet declared its 1QFY04 results but Bharti seems to be reversing its trend of losses and has posted a net profit in the quarter just gone by (read more). The gestation period for telecom companies is long and Bharti is showing positive signs by having posted profits in this quarter. We expect it to break even in the near future.

  MTNL Bharti Tele-ventures
(Rs m) FY02 FY03 Change FY02 FY03 Change
Sales 61,437 57,837 -5.9% 12,171 24,133 98.3%
Other Income 2,483 2,380 -4.2% 54 56 3.7%
Expenditure 37,676 38,512 2.2% 8,178 16,426 100.9%
Operating Profit (EBDIT) 23,761 19,325 -18.7% 3,993 7,707 93.0%
Operating Profit Margin (%) 38.7% 33.4% - 32.8% 31.9%
Interest 57 273 381.1% 906 2,821 211.4%
Depreciation 8,165 8,806 7.9% 2,172 4,438 104.3%
Amortisation - - - 1,086 1,910 75.9%
Profit before Tax 18,023 12,626 -29.9% (117) (1,406)
Extraordinary items (79) - (922) (378) -
Tax 4,938 3,651 -26.1% 177 (3) -
Profit after Tax/(Loss) 13,007 8,975 -31.0% (1,216) (1,781) -
Net profit margin (%) 21.2% 15.5% - -10.0% -7.4% -

In the last five years, MTNL has had an average growth (CAGR) in revenues of 4% in contrast to Bharti’s 80% growth in the corresponding period. This growth in Bharti’s revenues has been possible not only due to a rise in cellular usage but also due to its aggressive marketing and management strategies. On the subscriber front, MTNL’s total subscriber base in the last two years has risen by 6% (4.7 m in FY02 to 5 m in FY03), whereas the rise in Bharti’s total subscribers has been over 125% (1.5 m in FY02 to 3.4 m in FY03).

Basic telephony contributes almost 87% to MTNL’s revenues, whereas for Bharti, the fixed line segment contributes around 15%. MTNL is operating in the two largest metros of the country where the penetration levels are high compared to other parts of the country and the scope to increasing subscriber base is limited. Besides, it is facing strong competition from private players like Bharti who are making inroads and eating into its market share. A major problem with MTNL is the restriction on its operating areas. It cannot operate in other circles and therefore cannot easily compete with the likes of Bharti who operate in a range of areas where the potential is higher.

The cellular segment contributes a meagre 2% to MTNL’s total revenues and as far as Bharti is concerned, the cellular segment contributes almost 63% to its revenues. MTNL has increased its cellular subscribers by almost 50% in FY03 as compared to FY02. However, the growth pales in comparision to Bharti whose cellular subscriber base increased by 134% in the same period. Moreover, it has managed to improve its usage per minute, which has had a direct impact on its revenues. The cellular market has grown at an average rate of 93% in the last three years. We expect the trend to continue as the cellular tariffs are at their lowest. Bharti will consequently be a key beneficiary of this continuing trend.

The balance of MTNL’s and Bharti’s revenues is contributed by long distance telephony and others services. MTNL uses its long distance telephony to subsidise its local call costs. But the private players have reduced the long distance call costs and are giving MTNL a tough time. Besides, making long distance calls from mobile to mobile is cheaper than any other source. Let’s take the example of international calls: MTNL charges a hefty Rs 24 per minute (which it has refused to reduce) whereas Bharti charges Rs 16 per minute on regular days and Rs 10 per minute on weekends. In addition, for every 10 minutes of international calls, it is offering 2 minutes of free ISD talk time. This highlights the level of competition MTNL is facing from its peer Bharti as well as from other private players. Going forward, this may prove detrimental to MTNL’s growth, if it doesn’t move in line with the market.

In the last two quarters Bharti’s stock has gained almost 51% whereas MTNL has gained 14%. If Rs 100 were invested in each of the two stocks in the corresponding period in the previous year, then Bharti’s stock would now be worth Rs 150 whereas MTNL’s stock would equate to Rs 80, implying a loss for the investor. As of today Bharti scores over MTNL not only on the operational front but also as far stock appreciation is concerned.

Going forward, we still foresee MTNL losing out to private players in terms of aggressiveness and service standard perception. Though MTNL is a profitable company and other private players are still looking at breakeven, if the trend continues, private players are likely to take away a large chunk of the profitable growth in the telecom pie.

Equitymaster requests your view! Post a comment on "MTNL vs Bharti Tele". Click here!

  

More Views on News

Top Stocks Riding the 5G Wave in India (Views On News)

Dec 3, 2021

The 5G revolution is unfolding at a faster rate than you would expect. Here's how you can hop on to this ride.

1,300% in One Year - Are You Kidding Me? (Views On News)

Nov 29, 2021

An amount of Rs 1 lakh invested in the midcap stock a year ago would have turned into Rs 15 lakh today.

Bharti Airtel's Humongous Rights Issue to Open on 5 October. Key Points Investors Should Know (Views On News)

Sep 23, 2021

Shares of Bharti Airtel trade near record high ahead of rights issue.

This Company has Quietly Built an Enviable Startup Portfolio (Views On News)

Sep 22, 2021

The startups era has just begun, and it will provide massive opportunities to those who can spot the right trends at the right time.

More than 450% Gains for Tejas Networks in the Past Year. What Next? (Views On News)

Aug 18, 2021

Shares of Tejas Networks are up 173% since January 2021. Is the rally justified?

More Views on News

Most Popular

Tata Steel vs SAIL: Which Stock is Better? (Views On News)

Jan 13, 2022

With government initiatives set to boost the steel sector, find out who has a better chance of coming out on top.

These 5 Penny Stocks are Held by Rakesh Jhunjhunwala. Worth a Look? (Views On News)

Jan 18, 2022

Rakesh Jhunjhunwala is holding these penny stocks in his portfolio for several years now.

Tech Mahindra's CTC Acquisition: Too Expensive? (Views On News)

Jan 18, 2022

Tech Mahindra's acquisition of European IT-company fails to excite investors.

Time to Buy Energy Stocks (Fast Profits Daily)

Jan 14, 2022

Energy is a sector that looks set to take off. It's time to get in.

5 Hidden Tata Group Companies to Add to Your Watchlist (Views On News)

Jan 18, 2022

Here's all you need to know about these five Tata group stocks that aren't as popular as the others.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MTNL SHARE PRICE


Jan 24, 2022 (Close)

TRACK MTNL

MTNL - INDUS TOWERS COMPARISON

COMPARE MTNL WITH

MARKET STATS