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MTNL stumbles on Trai roadblock - Views on News from Equitymaster
 
 
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  • Sep 28, 1999

    MTNL stumbles on Trai roadblock

    MTNL's (Mahanagar Telephone Nigam Limited) venture into mobile telephony services has been delayed further with the Telecom Regulatory Authority of India (Trai) having decided to hold open house consultations on code division multiple access (CDMA) technology. MTNL has proposed to use this technology for its mobile telephony services venture.

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

    The company’s plans are also being questioned on two other accounts pertaining to cost structure and cross subsidy of services. Trai's decision is likely to delay the launch of the services to the end of October.

    MTNL, which has been grappling with a decline in new line connections in its market, is desperately looking for new drivers of growth. It has ventured into providing a number of value added services including internet access, ISDN, voice mail, video conferencing and electronic mail. However, its plans for mobile telephony services have been mired in controversy from the very beginning.

    MTNL needs to sort out this mess as soon as possible to minimise the potential damage on its bottomline. A further delay could give more time to its competitors to make deeper inroads in a largely untapped market. It has taken an aggressive stance and threatened to sue the Trai. However, what is of concern is that all cellular operators seem to have taken a joint stand and opposed the entry of MTNL on various grounds. This is likely to further delay MTNL's entry in this potentially lucrative market.

    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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