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Cellular foray remains elusive for MTNL - Views on News from Equitymaster
 
 
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  • Sep 13, 1999

    Cellular foray remains elusive for MTNL

    According to newspaper reports, Mahanagar Telephone Nigam Limited (MTNL) is likely to come under the revenue sharing regime for its mobile telephony venture. Under this regime, operators have to pay a licence fee amounting to 15% of their revenues to the Department of Telecommunications (DoT).

    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 fixed line license to operate in New Delhi and Mumbai until the year 2013.

    However, the bone of contention continues to be the licence fee that has already been paid by the private operators in the metro cities. The Telecom Regulatory Authority of India (Trai) has suggested that MTNL, too, pay up a similar amount to bring the players at an even level. MTNL is however likely to suggest an alternate structure, which is applicable to its basic telephony service licence. Under this the company pays Rs 900 per subscriber per year and also 22.5% of revenues as licence fee. The matter is still pending with the TRAI.

    MTNL's foray into mobile telephony services has been mired in controversy for some time now. The company is unlikely to get the go ahead anytime soon, as there are operational and financial issues that need to be sorted out first. However, given MTNL's experience and track record, the delay is unlikely to significantly dent its prospects in the future. Moreover, the advantages of a world class infrastructure and wide user base, which are its pillars of strength, are unlikely to get diluted anytime in the near future. This will give the company an edge over competition.

    Market View:

    The MTNL stock has been rated as a 'BUY' by analysts on account of it being one of the least expensive fixed line operators in the world. Moreover, the company already has a large customer base and a good infrastructure in place. It is also expected to earn substantially by using its existing infrastructure to provide value-added services.

     

     

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