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: Growth under threat - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 6, 2001

    MTNL: Growth under threat

    Mahanagar Telephone Nigam Limited (MTNL), the state owned basic service provider in Mumbai and Delhi, is witnessing considerable activity on the bourses and for reasons not for its liking. The scrip has fallen by almost 44% in the last eight months after having touched Rs 212 (the 52-week high). What is the reason for this volatility?

    One of the key reasons, Public Sector Undertakings (PSUs), like MTNL gained sharply at the beginning of the year was the talks of disinvestment. Another reason was the proposed launch of its cellular service in Delhi and Mumbai. The company did launch its cellular services in Delhi and Mumbai in February and March 2001 respectively. The Finance Minister also did set a disinvestment target of Rs 120 bn for the current financial year and included MTNL is the disinvestment list. But unclear policy framework has hindered the disinvestment process. Despite concerns of competition from private players (in both the basic and the cellular segments) and its legacy infrastructure, markets felt that MTNL would make significant inroads into the private players market share on account of its cost advantage.

    Worrying financials...
    (Rs m) 1QFY01 1QFY02 Change
    Sales 14,007 14,953 6.8%
    Operating Profit (EBDIT) 5,687 5,752 1.1%
    Operating Profit Margin (%) 40.6% 38.5%  
    Profit after Tax/(Loss) 3,691 3,773 2.2%
    Net profit margin (%) 26.3% 25.2%  
    Market cap/Sales 1.3 1.3  
    Market cap/subscriber 20,825 17,435  
    Revenue/subscriber 3,891 3,477  

    Where customer satisfaction is involved, costs i.e. tariffs need not be the key unique selling proposition. Though MTNL has managed to increase its cellular subscriber base from 18,243 in March 2001 to 18,460 in June 2001, private players have managed to increase base at a faster rate than MTNL. In fact, its subscriber base in Delhi has been gradually declining (9,593 in June 2001 as compared with 10,211 in March 2001). On the basic service front, the average revenue per subscriber (ARPU), as of FY01 stood at around Rs 12,400 levels as compared to the ARPU of Rs 25,000 for Hughes Tele.com. The ARPU is expected to come down with the reduction in domestic long distance telephony and international long distance telephony rates.

    Though Mumbai and Delhi are high revenue generating circles, as a percentage of all India revenues, the scenario is changing. The combined revenues of Mumbai and Delhi as a percentage of all India revenues stood at 28.3% in FY97 and is 26.1% in FY01. The Department of Telecommunication Services (DTS), expects this to go down to 24.9% by FY05. Although this is a significant portion will MTNL be able to tap it aggressively remains to be seen.

    Projected revenues (Rental + call charges)
    (Rs bn) FY97 FY98 FY00 FY05 FY07 FY10 CAGR**
    MTNL (Mumbai) 21.6 24.0 30.0 44.1 49.8 58.3 10.0%
    MTNL (Delhi) 15.7 17.6 21.8 32.1 36.2 42.3 9.9%
    All India 132.0 156.7 198.1 306.2 349.5 414.3 11.7%
    MTNL* 28.3% 26.5% 26.1% 24.9% 24.6% 24.3%  
    Source: DTS
    *Combined revenue of Mumbai and Delhi as a % of All India revenue
    **CAGR from FY94

    On the other hand, disinvestment has always been a non-starter. Given the company's bloated workforce combined with almost six labour unions, not many will be interested. On the competition front, the proposed entry of the third operator will further subdue revenue growth for MTNL in coming years.

    The scrip is currently trading at Rs 118 at a P/E multiple of 4.9x the annualised 1QFY02 earnings.

     

     

    Equitymaster requests your view! Post a comment on "MTNL: Growth under threat". 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.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    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 18, 2017 (Close)

    TRACK MTNL

    MTNL 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE MTNL WITH

    MARKET STATS