Case Analysis Mahanagar Cell phone Nigam Limited Marketing Essay

Mahanagar Telephone Nigam Limited is an Indian Government-owned cell phone service agency in the metro metropolitan areas of Mumbai and New Delhi in India. The business was a monopoly until 1992, when the telecom sector was opened up to other service providers.

MTNL provides resolved line telephones, mobile connection of both GSM - Dolphin(Postpaid) and Trump (prepaid) and WLL (CDMA) - Garuda-FW And Garuda-Mobile and internet services through dialup and DSL - Broadband internet TriBand. MTNL in addition has started Games on demand, video tutorial on demand and IPTV services in India through its Broadband Internet service called Triband. Phone numbers owned by MTNL start with the prefix 2 infixed collection telephones and WLL & in GSM Mobile services begin from 901x/ 9868/69 / 9968/69. MTNL also provides other services such as VPN, Internet Telephony- VOIP and leased lines through BSNL and VSNL.

MTNL has been actively providing links in both Mumbai and New Delhi areas and the efficiency of the business has drastically advanced from the days when one had to wait years to obtain a phone connection to now when one can get an association in even hours. Pre-activated Mobile contacts are available at many places across both Metros. MTNL has also launched very cost-effective Broadband Internet access plans (TriBand) directed at homes and smaller businesses. At the moment MTNL relishes the greatest of the market talk about of ISP services in Mumbai and Delhi.

India's First 3G Mobile Service By MTNL

MTNL began 3G services in India under the name of "MTNL 3G Jadoo" Services offered include Video tutorial call, Mobile Tv set and Mobile Broadband with broadband data connection up to 2 Mbit/s quickness from 11th December 2008, getting India on the 3G map of the world. MTNL blueprints to provide 3G services across India by mid-2009. After that MTNL Mobile users would be able to browse the internet with boosts to 2 Mbit/s on the smart mobile phones. MTNL also provides data cards for surfing internet on the Laptop or computer and Laptop at 3. 6 Mbps. MTNL will be putting in 15 lakh 3G lines in the first period of its 3G roll-out in Mumbai and Delhi (which currently have 40 lakh existing mobile lines).

Various risks to MTNL

MARKET RISKS

The telecommunications market in the locations of Delhi and Mumbai are among the most competitive marketplaces. MTNL faces strong competition from the other mobile operators and the essential service operators. This has led to an elevated pressure on margins due to reducing tariffs and also on the customer retention and acquisition. The Average revenue per consumer is also heading down. With new providers to arrive Delhi and Mumbai, such competitive pressures will probably increase further, placing a further pressure on the margins. Recently DOT has given LOIs to a number of new players which will lead to increased competition to market share. MTNL is confirmed only in two towns i. e. Delhi and Mumbai, therefore MTNL is not able to broaden its telecom services beyond its area of jurisdiction.

POLICY AND REGULATORY RISKS

The telecommunications sector in India is one of the best taxed sector. The high level of license charge is a huge pressure on the finances of the company. This is paid in addition to all other fees and duties that are levied on all the businesses. Regulatory guidelines can't be foretold and could at time, be such concerning influence the financials of the business.

MANPOWER RISKS

There is an enormous workforce and approximately 32% of earnings is allocated to staff. In comparison of the personnel costs of other operators, it is about 7% of the income. This is a significant risk that your company faces, as it has little overall flexibility in the matter and may have to keep to carry the price. It could in fact become even higher as wage negotiations are now due as per the earlier wage agreement that was for 10 years. Considering the tremendous progress of private sector and opportunities that have become available and option of job in telecom & IT areas, retention of suitable manpower is a large challenge. There may be 20% attrition rate among the list of young executives recruited for professional jobs.

OUTSTANDING DUES

Over the years, the total amount owned to MTNL by its customers have been increasing and gathered significantly. Realisation of dues from customers has become even more complicated in the progressively competitive telecom market as the customers can close the connection and take services of other providers. Initiatives are being made to reduce the exceptional and some success has been achieved in decreasing total exceptional in a multi operator environment, this risk remains.

Poor operating performance continues

Mahanagar Cell phone Nigam Small (MTNL) income and earnings continuing to slide in the quarter.

The fixed-line section continues to bleed: MTNL's wireline customers lowered by 1. 5% qoq to 3. 75 mn. Regardless of the bundling of services, the Company is unable to stem the drop in ARPU and damage in subscribers. Consequently, wireline revenue slipped 3. 2% qoq to Rs. 7. 6 mn.

Disappointing performance in the mobile section: Mobile income also dropped by 3. 0% qoq to Rs. 2. 1 bn on account of sliding ARPUs. For pre-paid customers, ARPU extended to glide for the business with a drop of around 13%. In addition, the Company's customer addition grew only by 6. 1% qoq, compared with the addition of ~10% qoq for the entire Industry.

Margins continue steadily to stay under stress: THE BUSINESS EBITDA margins lowered by considerable 500 bps qoq on account of a growth in personnel cost post income revision. We continue to believe that the Company's margins will drop around 15% for FY09 due to a lack of high ARPU fixed-line business and progress in low ARPU mobile business. Besides, huge employees will continue to move the margins southwards.

Competitor Risk: Tata Teleservices Limited and Reliance Infocom Limited are currently fighting with MTNL in the market for basic services in both Mumbai and Delhi, and Bharti Tele-Ventures Small is also contending with mtnl in the essential services market in Delhi. Many of these companies curently have significant telecommunications infrastructure in Delhi and Mumbai, including, with respect to Tata Teleservices and Reliance Infocom, low-cost CDMA mobile and set cellular technology. With about 62. 52% of these call devices having result from about 18. 39% in our access lines in service, they are particularly vulnerable to sacrificing market share if these or other new providers aggressively concentrate on their largest members. A few of their major customers have previously migrated to other basic service providers.

Various risks confronted by Telecom sector

Regulation and compliance : The regulatory authority in India has postponed the 3G public sale and creates new guidelines once in a while. It has also given 3G certificate for BSNL without giving it to other providers. Airtel and Vodafone which includes launched iPhone 3G mobile were left at night with 3G devices with no 3G service.

Entry of 4-5 players : Licenses were awarded to 6 new players. Unitech, Sistema, etc. . Sitema has started out its operations under the name of MTS by giving 1 million minutes free. New players and will be offering like these would very seriously dent the expansion plans of founded players. All the players should think out of the box and produce IDEAS. Next thing would be loan consolidation in the industry which has already been occurring in the telecom tower business.

Capital for extension : This is actually the biggest requirements for smaller players. While there are no smaller players, as the new players are supported by some heavy-weights, extension is still tough. This is where sharing infrastructure makes picture. Indus Towers is one particular example. BSNL has announced about leasing its towers. Initiatives like these can help both the more aged and newer players to penetrate into new marketplaces.

Attracting and taking care of talent and intellectual capital : That is a tough one. With fierce competition comes the expertise poaching. Companies should have some talent retention measures in place. Airtel has restructured its business into 9 verticals to sustain talent. Don't assume all company can do the same but, that is one option.

Management of tactical partnerships : Providing free SMS's or call rates at 40 paise each and every minute are no longer the differentiators. It is the value Added services which subject. There were bunch of partnerships which took place in the last 2 months. AskLaila- Airtel relationship for local search, Amar Chitra Katha - Vodafone, IDEA and Bharat Matrimony have tangled up for VAS. BSNL has recently tied up with Hungama site for music and game downloads. Tactical partnerships like these should be nurtured and maintained.

Inappropriate techniques and systems to aid exponential business development experienced over previous 4-5 years : This is where buying IT and the right tools is essential. These are the operations that should be outsourcing so the telecom companies can focus on their center areas. Indian telecom companies should outsource aggressively and give attention to extending their network and services.

Forecasting profits from technology and infrastructure investments

Privacy and security risks

Contain and reduce costs

Manage consolidation and mergers & acquisition : This might tie back again to point #2 of accessibility of new players and a possible consolidation in the telecom business and the tower business.

Corporate social responsibility and sustainability : Using the Satyam scam jolting India Inc, this would be on top of the radar for the companies.

Lack of safeguard for digital intellectual property : This could be next for Indian telecom. Too early but usually takes 2-3 years because of this to become a risk

Concentration of equipment manufacturers : Sourcing from an individual supplier or a couple of supplier may lead to great dependency. Satyam scam has just shown the earth how dependent one can become on the outsourcing services. Same case will be relevant to the telecom companies. For instance, Reliance sources almost all of its equipment from ZTE - a Chinese language company. This is a potential risk.

Investment risks : Investment is essential for increasing telecom sector performance. And investment risk is the principal determinant in making investment decisions. Investors consider/face risks related to three wide environments: a) macro-level country risk, associated with factors that often affect the entire current economic climate such as inflation, foreign exchange fluctuations, and political stability; b) market or commercial risk, associated with factors related to demand and supply, availability of alternative products, and the performance of challengers; and c) regulatory risk, emanating from federal government action, including however, not limited to, actions of the regulatory company with authority in the telecom sector.

Risk Management techniques employed by MTNL

Risk is the best four-letter phrase of business, investment and government. Entrepreneurs and politics leaders understand as well as anyone who if there is nothing ventured, nothing at all can be gained, which therefore risk can never be entirely eliminated. Nonetheless, your time and effort to reduce, or at least manage risk, has turned into a major focus of all corporate entities, and it's standard practice for general public companies to disclose their operating risks each one fourth in their general public filings.

The first, avoidance, is often as simple as not engaging in activity that produces the risk, but this not only eliminates risk but potential benefits as well. Risk reduction through concrete steps is far more common, and the specifics will be related to the sort of business and risk included. Risk transference is also highly beneficial as when an available option; it requires outsourcing the situation to another entity such as through the purchase of insurance. Finally, risk retention is inescapable in some instances where the hazards are either improbable, or the expenses of mitigating or transferring the risk are prohibitive.

Instead of divesting a stake as a one-shot, revenue-raising deal, induct a strong partner to develop services and revenues.

Serve individual needs, rather than offering 'products' with some interior geographic or technological definitions that are not easily comprehended.

Rationalize services like EVDO cards (broadband data cards) that are not customer-centric, because if they work in the rest of the country, they don't really in Delhi and Mumbai and vice versa.

MTNL could go for collaborative data-streaming with 2. 4 Mbps EVDO credit cards usable just about everywhere, offered with a service level and style that can only come with a hands-on spouse changing the off-putting way MTNL treat customers.

Get politicians away of procurement, and induct technology like cordless corDECT at 512 Kbps for rural areas if appropriate, even if it's 'old' and not state-of-the-art, rather than looking forward to years for alternatives that aren't there of 3G or LTE (Long-Term Evolution or 4G), and will cost much more.

Move up to 3G/LTE after some many years of generating gains.

Work with India's technology companies to construct local equivalents of Hawaii and ZTE, with India's certain markets. (This requires policies significantly beyond the ambit of the DOT, as in the way China has nurtured Hawaii/ZTE for years. )

Post effects of software of risk management techniques.

Minister of Express for Marketing communications and IT, Jyotiraditya M. Scindia released that the marketplace share of condition had telecom biggies Mahanagar Telephone Nigam (MTNL) and Bharat Sanchar Nigam (BSNL) acquired decreased. Regarding to agency options, while landline links of BSNL and MTNL order a market talk about of 78. 82% and 9. 32% respectively, the mobile associations of both the Public Sector Executing stand at 14. 14%(BSNL) and 1. 28% (MTNL) respectively. Thus the put together landline connections of these two PSU`s stand at 88. 14% while the mobile cable connections stand at 15. 42%. Options disclosed that the marketplace show of MTNL and BSNL possessed decreased scheduled to the surrendering of extra landline mobile phones and choice for mobile phones and customer`s preference for mobile and landline mobile phones from different service providers.

In circumstance of MTNL, to be precise sources said that there were capacity constraints in its GSM mobile network scheduled to non-commissioning of 75, 000 million lines each in Delhi and Mumbai by the vendors. Sources also added that during the past 2 yrs, sufficient capacity in GSM mobile equipment was sub-judiced and there was delay in supply of equipments.

Following TRAI permission for basic operators to provide limited range of motion, MTNL launched its Cordless in Local Loop (WiLL) service branded 'Garuda' in December 2001. By costing monthly leases and debris competitively, MTNL has increased the attractiveness of the service. While incoming calls are cost free, outgoing phone calls are incurred at the speed of Rs 1. 20 each and every minute, which is also the ruling basic telephony charge. You will discover two options. One, over a security deposit of Rs 5, 000, MTNL would provide the device and on the surrender of the device, the security deposit would be refunded. The other option is for the customer to choose the handset from the marketplace with no security first deposit. The handsets are already available in the market and you can expect rates to fall season in the returning years. The every month hire at Rs 450 is the same for both the options.

But the main element cause of matter is the earnings potential clients. Since Mumbai and Delhi are cities with high tele-density, customer base growth is likely to be on the lower aspect. While tariff restructuring has increased paid-minute telephone calls, it isn't commensurate with the street to redemption in tariffs. Also, in such a highly competitive environment, rates is not a sustainable differentiating factor. As customers are more and more stylish, telecom majors will have to improve service levels and pack value-adds. MTNL's future potential customers rely on its disinvestment. The new partner could bring in the technical knowledge and show the way for the business. But even here, there is a difficulty. With more than 60, 000 employees, which the management assumes as its biggest property ("The human durability is the foremost power for MTN, one needs to be cautious. To improve attractiveness, the government might decide to prune workforce to a controllable level before disinvestment.

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