MTNL’s woes show PSUs need a long-term game plan3 min read . Updated: 13 Dec 2017, 01:34 AM IST
In sectors like steel, oil and shipping, there are a number of public sector behemoths that could face a future similar to MTNL's in the absence of a clear road map
Quietly, almost surreptitiously, the government-controlled telecom services provider Mahanagar Telephone Nigam Ltd (MTNL) has floated another revival plan. The Hindustan Timesreported on 9 December that the corporation has prepared an ambitious Rs4,200-crore transformation plan.
Precisely where it plans to get the money for its latest revival effort isn’t quite clear, given that it has been in the financial doghouse for years now even as losses have mounted and its market share has fallen precipitously. In 2009, Mint reported that it had a 71% and 60% share of the fixed-line phones market in Mumbai and New Delhi respectively. More significantly, it had a 16-17% share of the burgeoning mobile phone market.
That early promise has been belied, with its market share in the all-important mobile services market dropping to less than one percent. What’s more, total indebtedness has grown. In March 2017, its net debt stood at Rs14,921.55 crore and it was borrowing money to meet its day-to-day expenses. Gross revenue from operations has declined steadily from Rs6,370.40 crore in 2004 to Rs2,849.12 crore in March 2017. Like most public sector white elephants, it is also grossly overstaffed, with its employee costs topping its revenues and with money for capital expenditure hard to come by, it is saddled with obsolete technology.
Thirty one years after it was set up as one of the first few experiments in the country towards creating a more efficient market-driven public sector, MTNL’s plight is a perfect example of what happens to a company in the absence of a clear game plan.
Twenty years ago when the government decided to rope in the private sector for providing telecom services, MTNL had assets that could have been invaluable to a new comer. It had—and continues to have—a sizeable land bank and at that early stage, its fibre optic network was extremely valuable. Even when the government in 2002-03 was looking at privatizing other public sector duds, MTNL was considered an exception since it had been given Navratna status in 1997 and was listed on the New York Stock Exchange in 2001.
Indeed, at its best, MTNL was a reasonably well-run corporation which extended its operations outside India to Nepal and Mauritius. But that was a long time ago. Confronted with a hyper-competitive marketplace and rivals with deep pockets, the public sector telco went into an irreversible downward spiral from around 2009-10 and for the last eight years, has just been going through the motions. Its slow death is painful to watch besides of course being a drain on resources.
As staff morale has plunged, customer support and service have suffered grievously, forcing even its remaining few customers to look for alternatives. Over the last 4-5 years, it has hired property consultants to help it monetize some part of the office space and land it owns. A commissioned report by consulting firm Deloitte to suggest a plan for its restructuring is currently with a Department of Telecom panel for consideration.
But for all the flogging, this is a dead horse. Ten years ago, had the telecom ministry chosen to focus on any one area (currently MTNL provides fixed telephone service, GSM & CDMA based mobile service, internet, broadband, ISDN and leased line services) based on the corporation’s strengths, it may have been possible to realize some value from the government’s investment over the years. Now, it is too late.
In many ways, MTNL was similar to CMC, the erstwhile Computer Management Corporation which the government wisely sold to Tata Consultancy Services Ltd in 2001, by which time it was evident that a government-controlled entity in an industry dominated by private companies was an anomaly. CMC was absorbed successfully into India’s largest software exporter, but there was to be no such happy ending for MTNL with successive governments dithering, fatally, over what to do about its 50,000 strong workforce.
Several other public sector undertakings in India are equally vulnerable. In sectors like steel, oil and shipping, there are a number of public sector behemoths that could face a similar future in the absence of a clear road map. If the perceived wisdom is that certain essential sections of the economy need a state champion, then these need to identified, bulletproofed from bureaucratic interference and given the operational and leadership freedom to chart a profitable course.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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