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 - Will it remain 'Maha' - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 15, 2000

    MTNL - Will it remain 'Maha'

    Telecom sector reforms are on a roll with the government announcing several policy changes. In all the excitement, the stocks of incumbent operators have taken a beating on the bourses. Mahanagar Telephone Nigam Ltd (MTNL), the basic telephony service provider in Bombay and Delhi, has reached its 52-week nadir of Rs 137.

    Despite its PSU overhang, the company has several pluses. It is operating in the two top circles of the country. It has a well-established infrastructure in place and has been in the business of telecom services for the past 14 years. Therefore, the company knows its markets and has suitable business processes in place. Further, the company has a strong brand identity and is backed by reasonable management.

    Does it mean that the markets have grossly misjudged this stock? There are issues that need to be ironed out. Being a PSU the company has weak brand values. The company is overstaffed and has to follow Government protocol for all decision-making, slowing down its reaction time. The Bombay and Delhi circles are the most developed and consequently growth has flattened. Further, it has to resolve the issue of the legacy infrastructure.

    The stock has been hammered on the threat of competition from the private sector, primarily Hughes Tele, in basic telephony. Increased competition will cause a drop in operating profits. Another serious concern is the technology change. The new entrants in the field are starting with a clean slate and can set up state of the art infrastructure. However, such privileges are not available to MTNL.

    Despite these drawbacks the company has reported a strong first quarter. Its turnover and bottomline has grown by 10% and 13% respectively. Currently, the stock trades at a multiple of 5.8x on 1Q-annualized earnings. Kickers for the stock could be rightsizing the workforce and the divestment by the Government in favour of the private sector. The reforms have opened up several new frontiers in the sector such as domestic long distance (DLD). The company is well positioned to capitalize on these opportunities, as it can leverage on its existing skill sets. MTNL will be entering the cellular space with GSM technology and already is a category B internet service provider with over 20,000 subscribers. The market is keenly eyeing how well the company executes these projects and whether it brings in the results.

    A positive signal on either of the above-mentioned factors could facilitate a re-rating of the stock. But will the signal come?

    Subscribers MTNL HIL*
    Mumbai 2,012,410 27,000
    Delhi 1,641,503  
    Total Subscribers 3,653,913 27,000
    Employees 62,000 500
    Employees/1000 subscribers 16.97 18.52
    Revenue (m) 50,325 638
    Market Price 138 12
    No. of shares (m) 630 1,553
    Market Cap 86,940 18,636
    Revenue/Subscriber (p.a.) 13,776 23,635
    Market Cap/Subscriber 23,800 690,222
    *Hughes Tele



    Equitymaster requests your view! Post a comment on "MTNL - Will it remain 'Maha'". Click here!


    More Views on News

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

    Most Popular

    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.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    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.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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


    Aug 21, 2017 (Close)



    Detailed Quarterly Results With Charts