Expert View

December 5, 2002
MTNL to emphasize on creating niche services

New Delhi -- Mahanagar Telephone Nigam Ltd (MTNL), the government-owned telco in Delhi and Mumbai, is repositioning itself to meet the challenges from basic and cellular operators. MTNL had a bountiful year, showing approximately Rs. 60 billion ($1.5 billion) revenue and Rs. 15 billion ($325 million) net profit for the financial year 2001-02.

Convergence Plus recently met Narendra Sharma, CMD, MTNL, to discuss the operator's prospects in view of the tough competition from basic and cellular operators, especially after the arrival of Idea, the fourth cellular operator, in Delhi and Mumbai.

Competition is now moving into a services-cum-tariff strategy, explains Sharma, an experienced telecom and management professional. The name of the game has changed, he points out, as he repositions MTNL for aggressively marketing its services.

CP: MTNL has three rivals in cellular and one in basic services - both in Delhi and Mumbai. What is your response to this intensified competition?

Narendra Sharma: MTNL's response to the competition is to give them an even bigger and better competition. We have been leaders in the area of tariffs. In addition, we are addressing all the issues - whether it is about our new services or the quality of service (QoS), or the time we take to rectify/attend to complaints, and are restructuring the organisation to meet the competition head on. Now, that there is competition and our products have to be sold, we are orienting to an aggressive marketing structure.

CP: In view of your extended WLL services, do you think that this would influence your own cellular services?

Sharma: As far as WLL services are concerned, we have always held that there is a market for every service, provided you can tariff it appropriately. We have created market segments for WLL, cellular and fixed line, whether it is for the lower- or the upper-end of the market. If we define the market as low- or high-end users, we are trying to meet the demands by different technologies and different tariffs. I personally believe that there is a room for every type of service and all of those can co-exist and grow.

We have kept the existing WLL services for that particular market having high usage and local emphasis. However, an international standard is required where there is high usage. The Dolphin service is meant for that upper-end of the market. The Dolphin service will also be made available for the lower end of the market by introducing tariff plans to suit subscribers. They can own a cell phone within a very limited budget through our Trump card and various other services.

CP: How have your other value-added services been doing?

Sharma: As far as our value-added services are concerned, we have a number of services which include premium services, freephone services and Internet services, but those are not significant in terms of volumes and tariffs. We will address these areas through our marketing division. We can also have videoconferencing and high-bandwidth Internet access through ISDN services. There was some problem in the premium services. It picked up very well, but was later misused. However, those are all part of the growth curve.

CP: You have been leading the price competition in cellular and WLL services that have created a ripple effect. Don't you think that a stage has been reached when further cuts will make your working improbable?

Sharma: In terms of tariffs, it is difficult to comment in case of both cellular and WLL services. It all depends on the market development. The cellular business has already reached the stage of intense competition and it is progressing towards the final stage of stable competition. Some mergers and acquisitions are taking place and competition will stabilise. Personally, at this point of time, it is very difficult to comment on the direction of tariff growth. We have to see how the market develops after the entry of fourth operator. The emphasis will be to create niche services where you can develop a market segment for yourself. It is going to be a very complex service cum tariff game.

CP: What has been the impact of steep reduction in call charges on your finances? How do you plan to raise the bottomline?

Sharma: We have had a reduction of almost 62 percent in call charges, which has dented our revenues. We are expecting the usage to compensate this over a period. The first impact will be the growth in volumes of telephone services and the second impact will be a reduction in costs of long-distance carriage. We are developing this new segment to make services like videoconferencing more affordable. Therefore, the reduction in tariff is not only about volumes but also makes other services affordable. Similarly, tariffs have come down from Rs. 42 to Rs. 24 on international long-distance call charges. I should imagine that videoconferencing on international level should also become more popular, although, these market segments will have to be developed. These are the possibilities that will emerge due to reduction in tariffs.

CP: Do you welcome the proposal floating around that MTNL and BSNL should merge to become one telecom giant?

Sharma: As far as the merger of MTNL and BSNL is concerned, you are aware there are various options to maximise the profits of all stakeholders. The consultants are working on it and are looking at various options. Finally, the best option will be chosen. We are looking to optimise value for each one of our stakeholders. While we are trying to figure out the best option, it is possible that the status quo will be continued. Each and every option is being evaluated.