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MTNL launches mobile service - Views on News from Equitymaster
 
 
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  • Oct 4, 1999

    MTNL launches mobile service

    Mahanagar Telephone Nigam Limited (MTNL) has launched its mobile services in Delhi. The launch has come amid several objections that have been raised by the other cellular operators and the decision by the Telecom Regulatory Authority (Trai) to hold an open house on the technology related aspects of MTNL's 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 has launched its services in the Delhi circle, and will be initially offering only 9,000 connections. The cost of the service is a fraction of that offered by its competitors. MTNL is charging Rs 1.40 per three minutes, with free incoming calls and a deposit of Rs 10,000, as against the existing cost of Rs 6 per minute of outgoing and incoming calls charged by the two operators in Delhi. The move is likely to intensify the competition in the markets.

    MTNL's foray into cellular telephony services, at rock bottom prices, has for long been anticipated. The launch of the service in Delhi is likely to put increased pressure on existing operators to reduce tariffs. This could further elongate the break-even period for these companies.

    For MTNL, the entry into these services will provide it with a new avenue for growth even as growth in its fixed line telephony services slows down. However, with the service being offered at rock bottom prices it is uncertain whether the company will be able to generate profits. Moreover, the scope for future price increases is limited, as competition is likely to become more intense.

    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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