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MTNL seeks govt help to increase revenues by 10,000 cr

MTNL seeks govt help to increase revenues by 10,000 cr

New Delhi: State-run Mahanagar Telephone Nigam Ltd (MTNL) has drafted a plan to increase revenue by as much as 10,000 crore this financial year, according to a presentation made by the company to communications minister Kapil Sibal —but around 85% of this will be revenue not directly linked to its business.

The telco’s key proposal is to develop its large land banks in Mumbai and Delhi, where it operates. According to the presentation, reviewed by Mint, MTNL has some 230,000 sq.m. of technical land and 380,000 sq.m. of residential land in the two cities. Technical land refers to land specifically demarcated for the telco’s commercial operations.

The telco estimates it can earn as much as 3,600 crore in the next three years by selling the built-up area developed from the land and 400 crore from leasing some of it.

MTNL has already earned some rent from some of its built-up space in the two cities— 4 crore in Delhi and 30 crore in Mumbai. It estimates total revenue from renting space at around 66 crore for the full year.

“Approval is sought from the DoT (department of telecommunications) for long-term built-up space renting," MTNL said in the presentation, made earlier this month.

The biggest boost to the telco’s balance sheet is expected to come from the government in the form of a refund for surrendering its Broadband Wireless Access (BWA) spectrum. The telco was allotted spectrum in Delhi on a payment of 2,241.02 crore and in Mumbai on a payment of 2,292.95 crore, which means a total refund of around 4,560 crore. As reported by Mint in December 2011, DoT had accepted the request of both Bharat Sanchar Nigam Ltd (BSNL) and MTNL to return their BWA spectrum for a refund of the money paid for the air waves.

BSNL had asked to be allowed to return the spectrum in 12-13 circles of the 19 it operates in.

“They need a tremendous amount of government support. Nothing can be done without money from the government at this point. They have lost market share in all their businesses, especially the fixed-line business, and need a lot of support to be able to focus on mobile and data business," said a Mumbai-based telecoms analyst working with a Switzerland-based investment banking firm, requesting anonymity.

MTNL is also aiming to increase the contribution of non-voice services such as short messaging services and other value added services to its total revenue to 15% from 10% last year, a top MTNL executive said requesting anonymity.

State-run telcos such as MTNL and BSNL have been faced with increasing losses over the past couple of years. Analysts blame this on telcos having a number of state-mandated social obligations to fulfil as well as government interference. Both BSNL and MTNL had significant cash reserves, the interest on which allowed the telcos to post profits. But they then had to pay for 3G and BWA spectrum in all circles without being given the option of choosing which circles and at what price, leading to the cash surplus being completely depleted. As state-owned telecom companies, MTNL and BSNL were getting spectrum in all circles without having to bid but had to pay the price discovered at auction.

MTNL ended the last financial year 2011-12 with revenue of 3,368.99 crore and a net loss of 4,018.45 crore.

The telco has seen a slump in profit over the past three years. Net loss widened to 2796.9 crore in 2010-11 from 2,610.4 crore in the previous fiscal year and revenue fell to 3,745.9 crore from 3710.8 crore. The last time MTNL made a profit was in 2008-09, when it posted a net of 205.9 crore on revenue of 4,496.2 crore.

The stock has slumped 29.3% over the past year ending at 32.10, up 1.26%, on Friday on BSE. The benchmark Sensex closed at 17, 197.93, up 0.15%.

MTNL is not only looking to increase the inflow of cash but also at ways to cut costs.

According to the presentation, the operator’s 42,000-employee workforce is three times its required strength. To cut staff, MTNL estimates it will have to spend about 5,000 crore on a voluntary retirement scheme (VRS), making it the biggest such plan that the telco has offered. The present staff cost is around 4,000 crore, including retirement benefits.

Bharti Airtel Ltd, India’s largest telecom services provider, has fewer than 18,000 employees across the country and outsources several functions.

MTNL also proposes to restructure its loans—to lower the annual interest burden of 1,100 crore—into long-term bonds with sovereign guarantees from the government.

The telco sees the police as a potential revenue stream. It expects to make some 200 crore this year from setting up surveillance projects for the Mumbai police and traffic systems for Delhi police.

MTNL plans to offer data services on its 3G network via the mobile virtual network operator (MVNO) route. It expects revenue of around 400 crore annually from this, and expenditure on expanding and strengthening the network at around 200 crore over the next three years.

The company will launch the service by January if the government approves the MVNO policy. As Mint reported on 31 May, the Union cabinet has cleared the National Telecom Policy (NTP) 2012 that envisages allowing MVNOs to cut costs and improve capacity utilization. NTP is a framework document based on which future telecom policy will be decided.

MTNL is betting big on its enterprise business, expecting revenue of around 300 crore a year from it.

The telco is also looking at an additional revenue of 200 crore from advanced technology for small and medium enterprises—a Next Generation Converged Network based on Multi Protocol Label Switching technology, which allows for enhanced Virtual Private Network services with speeds of up to 10 Gbps.

MTNL is looking at expanding its data centres business by setting up more capacity across the country, independently and along with joint venture partners. The telco already has data centres in Chennai and Mumbai and is setting up new ones in Hyderabad and Delhi in a joint venture with Software Technology Parks of India. The project is expected to be completed in nine months and is expected to earn the telco additional revenue of 10 crore annually. MTNL expects to earn additional revenue of 5 crore from services such as web hosting, co-location and advertising from email solutions.

In contrast with this, Tulip Telecom Ltd announced in February the launch of its Bangalore data centre that it said was the largest in India and the world’s third-largest single-site outfit. Tulip said it had booked orders with a potential value of up to 600 crore for five years for the data centre.

MTNL expects to make some extra money from additional services—about RS 1 crore from the Unique Identification Authority of India and another 5 crore annually from digital signature certification services on an expenditure of 5crore.

The telco expects another 20 crore from the human resource development ministry’s National knowledge Network and National Mission on Eduction through Information and Communication Technology, the presentation said.

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