MTNL seems to have done fairly well in the last fiscal, judging by its 6.2 percent increase in turnover from Rs 6,022 crore to Rs 6,397 crore. Its net profit also increased from Rs 898 crore during FY 2002–03 to Rs 1,278 crore in FY 2003–04.

But, all may not be well, and a closer look at other parameters indicate the company needs some quick belt tightening to remain in the top league. Its mobile (CDMA and GSM) subscriber base increased by a mere 110,000 subscribers, translating to a 29 percent growth as against an industry average of 135 percent growth. The fixed-line subscriber base declined from 46 lakh customers to 43.31 lakh customers. The CDMA customer base increased by 52,728 subscribers. But competitors like Reliance Infocomm have notched up more than four lakh subscribers in Delhi alone, within a few months.

MTNL, which was the first to launch limited mobility services in 1999, has less than 1.5 lakh customers after all this while. While the decline in fixed-line subscribers can be attributed to the incumbency factor and the entry of private operators, mobile services are greenfield projects and reflect MTNL´s lack of aggression. What´s more, MTNL´s GSM ARPU in FY 2003–04 was Rs 375.

A part of MTNL´s woes can be attributed to its lack of scale despite its desire to expand outside the two metros. Besides, it has been extremely slow about introducing new services and has a dismal record of creating awareness about its existing ones. Not surprisingly, MTNL looked at expansion outside the country through its new subsidiary, MTNL International. It has already launched CDMA-based limited mobility services in Nepal, garnering over 15,000 subscribers. The company has also won the license to provide CDMA-based basic services in Mauritius. It has floated a tender to buy new equipment. Also, the company is looking at Kenya, Madagascar, Malawi, and Rwanda.

Nevertheless, the year also saw MTNL busy scripting its comeback strategy. It invested Rs 1,182 crore in its network—up from the previous year´s investment of Rs 838 crore. The investments have gone mostly towards expanding its reach to uncovered areas and also in upgrading E-10 B exchanges (first generation digital exchanges) to 3G exchanges. The GSM network was expanded to 2.25 lakh lines in both the metros and WLL capacity was expanded to 1.8 lakh line in Delhi and 1.48 lakh lines in Mumbai. The CDMA network was upgraded to 2000-1X.

Last year, the company forayed into broadband. Initially, it had signed MoUs with three vendors to install DSLAM/ADSL equipment at exchanges and provide set-top boxes to customers. MTNL has now taken over this operation and has over 1,000 lines as pilot projects in each city. It is also getting into new areas like digital signatures, that enables subscribers to file income tax returns online. MTNL has also initiated measures to win back customers. It appointed a general manager to look after high net-worth customers and set up a single window system for customer grievances. It expanded its call center—from 68 seats to 108 seats (to be expanded again to 168 seats this year). But clearly, all this was not enough and MTNL had to reach out for its ultimate weapon—pricing.

The fact is that MTNL still has one of the largest cash reserves in the telecom sector and could use it to create havoc in a price-sensitive market. It has already brought down the monthly rental for cellular users to Rs 49, the lowest in the country and slashed short messaging rates to 25 paise. The year also saw a change of wguard at MTNL with Narendra Sharma retiring and RSP Sinha taking over the reins.