Mahanagar Telephone Nigam Limited (MTNL) revenues and earnings continued to slide in the quarter.
The wireline customers decreased by 1.5% q-o-q to 3.75 million. Despite the bundling of services, the company is unable to stem the drop in ARPU and loss in subscribers.
Consequently, wireline revenue dropped 3.2% q-o-q to Rs7.6 million. Mobile revenue also fell by 3% q-o-q to Rs2.1 billion on account of sliding ARPUs. For pre-paid customers, ARPU slipped around 13%. Moreover, the subscriber addition grew only by 6.1% q-o-q, compared with the addition of ~10% q-o-q for the overall industry.
The EBITDA margin witnessed a downfall by substantial 500 bps q-o-q on account of a rise in staff cost post wage revision.
We continue to believe that the Company’s margins will drop around 15% for FY09 owing to a loss of high ARPU fixed-line business and growth in low ARPU mobile business. Besides, huge work force will continue to drag the margins southwards.
Based on our DCF valuation, we arrive at a target price of Rs86 for the stock and reiterate our SELL rating on the stock based on constant unsatisfactory operating performance.