For the first time since 1995, Mahanagar Telephone Nigam Ltd (MTNL) slipped from No. 2 to the No. 3 position due to the entry of BSNL at the top of V&D 100 ranking.

In the FY 2000-01, MTNL’s sales increased to 10.6 percent, with a sales turnover of Rs 5,732 crore against a figure of Rs 5,182.2 crore in the FY 1999-2000. The net profits, however, soared by 52 percent to reach Rs 1,653.52 crore, which is more than the turnover of some of the Top 10 companies in V&D 100. The operating profit margin also increased from 37.5 percent in the FY 1999-2000 to 40.5 percent in the FY 2000-01. MTNL now enjoys tax benefit under Section 80 (IA) of the Income Tax Act, 1961.

On the face of it, MTNL’s growth of 10.6 percent looks much better than the previous year’s sluggish growth of 2.9 percent. But the fiscal 2000-01 was not very significant for MTNL, as it did little to prepare itself for future competition. In Mumbai, it started feeling the heat of competition from Hughes Tele.com while Delhi still remains a monopoly market for it. MTNL is looking at a 10 to 11 percent rise in sales in the current year, almost the same as that achieved in 2000-01.

In all the new areas that MTNL ventured into, the story has been unimpressive. While its Internet services growth remained sluggish, the cellular service that it launched in Delhi and Mumbai under the brand name Dolphin, bombed miserably. As far as strategic moves are concerned, MTNL did bid for fixed service license in ten circles and was planning to bid for cellular services as well, but the government rejected the plan. The only silver lining is MTNL’s plan to provide fixed service in Bangladesh, in a JV with WorldTel, which bagged the license. Not much is known about its JV with RailTel, which would enter the long distance market, if the government approves the proposal.

MTNL has committed a provision of 3.3 lakh net switching capacity and 50,000 limited mobility connections during 2001-02, in a MoU signed with DoT. The company plans to invest Rs 10,000 crore in the next five years, out of which about 80 percent will be met from its internal resources.

The government has announced its plan to reduce its stake to 26 percent in MTNL by the end of 2001-02. The government, currently, holds 56 percent stake in the company, while the GDR accounts for 11 percent. About 14 percent is held by foreign institutional investors and NRIs, and the rest is owned by the Indian investors.

MTNL, this year, has mammoth tasks ahead. On the one hand, it has to go ahead with its disinvestment plans. On the other hand, it has to tackle competition in both areas—where it is an incumbent as well as a challenger. To start with, it has to move faster.