MTNL Q1 net tumbles 34 %

MUMBAI: Mahanagar Telephone Nigam Ltd (MTNL) said on Tuesday that its first quarter profits sank 34 percent as billing rates tumbled due to competition in the newly deregulated industry. State-run MTNL provides fixed-line, cellular and Internet access services in two of India's biggest telecom markets -- Bombay and New Delhi. Net profits in the April-June period slid to 2.5 billion rupees ($51.3 million) from 3.8 billion rupees, on operating income of 14.94 billion rupees, little changed from a year ago.

The profit figure was in line with two of three analysts' forecasts in a Reuters' poll, while operating income was substantially above the 14.10 billion average of the three. "The fact revenue didn't fall as expected could be because MTNL has accounted for incoming international call revenue," said one telecom analyst speaking on condition of anonymity. Analysts traced the profit decline to the effects of competition in the newly deregulated Indian telecom market.

"One of the key factors is the deletion of lines," said a second analyst, referring to the termination of fixed-line services by companies wooed away by cheaper rates offered by new market entrants. "The impact on revenue is considerable because the average revenue per user is much higher for companies," said a second analyst, who also asked to remain unnamed.

A second big factor, the analyst said, was an 18-20 percent decline in international phone rates from April 1. That had a corresponding impact on revenue received by MTNL for calls originating or terminating on its network. Analysts had also expected revenue and profit to fall because of the steep cut in national long-distance tariffs and drop in cellular subscriptions in April and May.

Domestic long-distance tariffs plunged by as much as 62 percent in January after Bharti Tele-Ventures became the first private company to enter the state-dominated business. And the number of cell phone subscribers declined for two months after the government began in April to require all cell phone users to be identified, and all mobile phone owners to file income tax returns.

Shares of the New York Stock Exchange-listed MTNL closed down 2.8 percent at 132.10 rupees on the Bombay Stock Exchange (BSE) following the release of the results. The BSE benchmark index fell 1.3 percent.

At Tuesday's close, the shares were up 33 percent from their 52-week low of 99.25 rupees recorded in mid-September, but down 25 percent from the high of 177 rupees hit on February 18.

Outlook

Analysts said a big variable in forecasting the outlook for MTNL were, the inter-connect agreements to be concluded with other service providers like Videsh Sanchar Nigam Ltd. and Bharat Sanchar Nigam Ltd (BSNL), which provides fixed-line services everywhere in India except Bombay and Delhi.

One analyst had a "buy" recommendation on MTNL in anticipation of the company eventually negotiating more advantageous pacts than those that have expired. The other analyst rated MTNL a "buy" because the government was expected to sell control to a strategic partner some time soon, giving a boost to its share price. "A lot of foreign phone companies might be interested in bidding for MTNL because of its networks in Bombay and Delhi," the analyst said.

(US$1 = Rs 48.71)






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