State owned Mtnl operated fixed line mobile service in delhi and Mumbai.
This state owned company is facing the brunt of typical characteristic of wage hikes in govt companies irrespective of performance of employees and profitability.
It incurred a net loss of Rs 894.95 crore for the third quarter ended December 31, 2009.
The company’s total income decreased to Rs 919.44 crore for the quarter under review from Rs 1124.82 crore during dec 2008 to dec 2009.
While recently mtnl has reported losses of Rs.1,573 crore during the fourth quarter ended March 31, 2010 against a net loss of Rs 73 crore during the corresponding quarter of the previous year.
According to the company this loss is due to arrangements of retirement pays, revised pay,arrears etc employee costs.
The increase is primarily due to wage revision of employees amounting to estimated arrears of Rs 740 crore and Rs 1,754 crore account of actuarial valuation for retirement benefits and for change in benefit of full pension for 20 completed years of service instead of the existing 33 years of completed service.
Thus mtnl is in already in a slack financial condition-and moreover according to estimates it has to manage around Rs.7000 crore for getting 2G and 3G spectrum licences. This would only add to more pressure on it.
Looking at the Telecom Sector scenario in India during the last one year, this sector has been probably the biggest wealth destroyer sector. Financially, managerially and strategically efficiently run private players have been failing to maintain market share and market capitalization alike. In this wake it seems quite apparent that this state owned company is likely to underperform in terms of profitability and all.
The tariff war amongs domestic players has just started-and like this was not enough international telecom players like virgin mobile, docomo, aircel, mts, and other have already started their operations in India while etisalat, uninor and some others are girding up their loins to take a pie of wrenched Indian telecom sector.
For mtnl, during the year ended March 31, 607,777 GSM mobile phone customers and 120,330 broadband customers were added. MTNL's 3G Subscriber base has gone up to only 3.48 lakh subscribers despite being spectrum much in advance.
Ultimately it seems that the Govt would get in a fix in case of this telecom psu responsibility. We advise investors to exit from this counter. And traders to take opportunity to profit from decline in this counter.
While we now know how the telecom sector has been biggest wealth destroyer in last one year…
Mtnl can not stand comparision against private peers.
Telecome sector is no longer monopolistic sector.
Mtnl doesn’t have benefit of widespread presence like bsnl, once the gsm players and broadband and dth players start severely attacking its delhi Mumbai regions it will face nightmares.
While it will remain to be seen how MTNL’s 3G and IPTV services help it revive its financial.
We recommend Sell on MTNL.
Please visit again to Read Report on “HOW FII TRADES THEORY HELPED OUR CLIENTS EXIT THE TELECOM SECTOR when RelComm was 300 and Bharti Airtel is 400!! Also Read update and full report on our 29April Report on Banking Sector.
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