as the share market remain subdued, stock of PSU telecom
major Mahanagar Telephone Nigam Ltd (MTNL) has been in
the limelight in the last couple of weeks The MTNL stock
has been gathering steam over talks that a possible merger
between the company and Bharat Sanchar Nigam Ltd (BSNL).
have been strong rumours in the market about a possible
merger between the two state-owned telecom companies.
The MTNL stock had bounced back from its recent low of
Rs 95 and is now ruling over Rs 130 levels and many broking
houses are now setting a target of Rs 180 price for the
proposal of merger of MTNL-BSNL is not new. It was first
mooted about two years ago. However, the circumstances
are quite different now. Unlike the previous attempt,
which seemed to block privatisation moves, this one seems
to be backed by more genuine
intentions, according to analysts with SSKI, a leading
Mumbai-based broking house.
from the core fixed-line business of MTNL and BSNL have
seen a marked revival since then, and the upside potential
in wireless is only partly tapped. A merger will provide
MTNL with the cushion of vertical integration even as
BSNL gets a chance to extend its success in wireless to
Mumbai and Delhi.
Also the government is unlikely to short change minority
shareholders in case of an eventual merger. MTNL and BSNL
were much more vulnerable then than now.
Long-distance rates were still falling, competition was
just beginning, and growth prospects of the wireless industry
were still somewhat unclear.
All of that has changed now. Long-distance rates have
now stabilised, and any further cuts are likely to be
of manageable proportions. Wireless subscriber base has
boomed over the past two years, from 6.4 million subscribers
in March 2002 to over 35 million now.
least BSNL has been able to participate in the wireless
boom, with its subscriber base currently at 5.5million.
Also, the introduction of new interconnect (IUC) regime
has revived the core fixed-line business (though investors
are still in denial).
revenues were up 10.4% in FY2004, while BSNL''s revenue
is up 15% in the fiscal, due to its success in the wireless
business. As a result, both companies'' profits have also
has eight times as many fixed lines as MTNL. Its revenues,
however, are only four times those of MTNL''s, despite
additional sources of revenue, mainly long-distance carriage.
the wireless market, BSNL has been far more successful.
BSNL''s employee cost as a percentage of revenues was 24.8%
in FY2003, comparable with 26.5% for MTNL (FY2004). The
employee cost is comparable despite BSNL''s superior lines
per employee (100 vs. MTNL''s 75) due to its lower revenue
had Rs 34 billion cash on its books as on March 31, 2003,
against MTNL''s Rs26 billion as on 31 March 2004. BSNL''s
debt levels are manageable, as most of its capex has been
funded by internal accruals.