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MTNL to focus on infotech and internet services - Views on News from Equitymaster
 
 
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  • Oct 29, 1999

    MTNL to focus on infotech and internet services

    According to newspaper reports, Mahanagar Telephone Nigam Limited (MTNL) is stepping up its presence in the infotech sector and plans to derive 25% of its revenues from IT and internet services by the year 2002. MTNL currenly derives 10% of its revenues from infotech.

    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.

    MTNL has planned to aggressively step up its internet customer base from 60,000 users to over 200,000 users soon in Bombay and New Delhi. It is targeting a market share of 40% by 2002. The company has also applied for an international gateway licence. MTNL is shifting its internet business to a new subsidiary-Millenium Telecom Company. The move will help the management to focus on internet related business.

    MTNL's move to focus on internet and infotech related services will help it in sustaining growth even as its telecom business comes under increased competitive pressures. Also, the margins in the new focus areas will be higher, pushing up overall margins.

    MTNL however continues to focus on the Delhi and Bombay markets for its internet services. It will have to target other markets as well if it were to attain the number one position. This will involve capital expenditure as it lacks infrastructure in other markets. Also, there are possibilities of a conflict of interest in several markets, as its parent, the Department of Telecommunications also plans to offer internet related services. This could create complications in the future.

    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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