MTNL -9 : Jadoo Fails

The PSU service provider scraped through another year of loss making. The
operator's revenue dipped 18.7%, totaling at Rs 3,650 crore. The downfall in FY
2009-10 was more than the previous fiscal's 5% decline. The operator garnered
about 9% growth in its revenue from broadband subscribers. However, the revenue
from cellular services depleted by 6.3% at Rs 750 crore in FY 2009-10 against Rs
800 crore in FY 2008-09.

The operator failed to get any mileage from the advantage of having launched
3G services before the private players. Till date, MTNL has about 5 lakh 3G
subscribers combined in Delhi and Mumbai. The operator tried lower-pricing
strategies selling its 3G SIMs for the cost of GSM services. It came up with a
plethora of offers for the 3G Jadoo, but they failed to spell any magic.

The operator's endeavors to pull 3G subscribers could hardly be transformed
into tangible results. The company launched India's first operator branded 3G
handset along with Micromax. It also collaborated with Micromax Informatics and
Nokia that allow it to offer 3G handsets at subsidized rates. The operator is
committed for looking to strike similar deals to make a broader range of
affordable 3G devices available to its customers.

It bundled its 3G wireless solutions with Dell laptops and HCL Infosystems,
which retails laptops. Aimed at enabling superior experience for MTNL's 3G
services, MTNL and Qualcomm decided to work together on a technical audit of the
operator's 3G network.

To compete with the likes of Tata Photon and Reliance Netconnect, MTNL's
Mumbai telecom circle announced the launch of Micromax 3G data card with
existing wireless broadband service providers in this category. The service
provider could not do any wonders on the cellular services end either. It was
amongst the last ones to react to the aggressive per second billing; though a
bit late, MTNL made a bold announcement of half paisa per second plan. It also
offered per second plans for 3G users.

Already wilting under losses, MTNL received a blow of losing its top leader.
Facing flak over declining revenues and market share, the chairman and managing
director, RSP Sinha was made to step down, and reigns were handed over to Kuldip
Singh, director (technical).

Data usage has gone up by 50% over the last few months CMD, MTNL, Kuldip Singh

It was another year of losses, especially on the cellular services side. How has FY 2009-10 been for you? Last fiscal was just as tough for us as it was for any other player in the market. If you look at the growth of the entire telecom services industry, it has shown a fall the growth in this space has been almost flat. There were high pressures on the ARPUs. Like in the case of any other player, our ARPUs also suffered the heat of pay-per second tariff plans. While our revenues fell, we have grown physically. We also have certain limitations. Since we operate only in Delhi and Mumbai, both the cities are saturated in terms of mobile penetration. We have no opportunity of getting new subscribers from tier-2 segments. I am sure our ARPUs will also improve with the market. In spite of aggressive marketing, MTNL could not pull a significant number of 3G subscribers. What do you think went wrong? We have about 5 lakh 3G subscribers as of now. We need to understand any new offering takes time to take off. When we launched our broadband services, we used to get five to six connect requests a day, but now we add about 1,000 connections everyday. A technology or offering must reach a critical mass. To break this entry barrier, we started with innovative pricing packages. We are looking forward to the rollout of services by the private players as competition will bring in better services. Data is going to be the major contributor to operators' revenues in the times to come, however, voice still remains the basic source of earning. In the beginning, we were going slow on the 3G service usage, gradually things are beginning to change. Data usage has gone up by more that 50% over the past few months. Do you think outsourcing your networks to players like Virgin and Spice will make thinks better? We are not outsourcing the network management. We are in fact looking at the franchise model, with an aim to do wholesale business by getting into partnerships on a revenue-sharing basis. This will also help us market the services well in line with other private players. MTNL has a prestigious project of Commonwealth Games 2010 which it has to deliver. Give us an update on the preparations. It is a matter of pride to have been selected for such a project. For this project, we are supposed to set up a dedicated telecommunications network-to be obtained on a wet lease which will include supply, installation, testing, commissioning, operation and maintenance and providing professional services. This setup will enable an efficient system of communications that will allow transmission of games data, security data, high definition broadcast signal (HDTV) between sports venues, international broadcasting centers, press centers, master control facilities, etc. We have already set up the network, equipments have been bought. We also have to provide dark fiber, 90% of which has been laid. However, all the venues for the games are not ready yet, so we will be completing the pending work as soon as the venues are handed over to us. What will be your new focus areas? We will soon be rolling out WiMax services, we will be taking the franchise route here. We have already done some pilots on fiber-to-home and will be undertaking the commercial rollouts this year.

Amidst shrinking cellular market share and falling fixed line revenues, MTNL
had been betting big on it's fixed line broadband services. In FY 2009-10, even
the Indian broadband segment headed for a rigid price war. MTNL announced
doubling of speeds for existing users in Mumbai circle at no extra cost. The
slashed prices constituted more than 40% reduction as subscribers could get 512
Kbps connection only for Rs 999 against the earlier tariff of Rs 1,599 a month.
This followed Airtel's 40% reduction in broadband prices and offer of 512 Kbps
unlimited connection at Rs 1,099 a month.

The operator is looking for franchise partnerships based on revenue sharing
model for its 3G services. This will solve a key problem of marketing its
service. The Service provider is all set to rollout WiMax services this
financial year, and will be be taking the franchise route here. The service
provider has already done some pilots on Fiber to Home and will be undertaking
commercial roll out this year.

Designated as the official telecom service provider for the upcoming
Commonwealth Games 2010, to be held in the national capital, the operator has
the challenge to meet international standards of services. The service provider
will be receiving Rs 1.82 bn from the Indian government to deliver this project.