Public sector telecom companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) should not pursue 3G (third generation) technology as it will be a further strain on their already stretched finances, according to analysts tracking the sector.
The two companies “neither have the quality subscriber base that will opt for 3G nor the ability to churn highend users from competition”. Further, matching the base price of the highest bidder will result in outflow of funds, which will weaken the finances. In the case of MTNL, a listed entity, it will also deprive shareholders of any dividends. “In our view, it makes no business sense for MTNL to match the highest bid for 3G spectrum auctions and incur capex to upgrade its network,” HSBC Securities analyst Rajiv Sharma said in a report.
MTNL is better placed to leverage its fixed line infrastructure for wireline broadband products, it added. Commenting on MTNL’s plans to involve global telcos to run 3G operations, the HSBC report said, “We believe the chances of MTNL benefiting from such a structure will be restricted as the state-owned enterprise culture of the company will get in the way of foreign telcos, restricting their ability to deliver.”
According to Ascentius Consulting principal analyst Alok Shende, the below industry average revenue per user for MTNL and BSNL reflects that the companies have attracted price-sensitive , low-minutes of usage subscribers who do not use VAS services and would find no use for 3G services.
In the six months of its 3G launch, BSNL has roped in just 10,733 subscribers. The figure for MTNL stands at a dismal 902, an average of just 150 per month across Mumbai and Delhi, considered the two most lucrative circles for 3G in India.
The two telcos have got spectrum ahead of private players and will have to match the highest bidder. “MTNL and BSNL are undergoing tremendous financial pressures owing to weakness in their core business. To be burdened by thousand of crores of license fee and setting up a 3G network will severely constrain the accounts for a while,” said Shende. Meanwhile, BSNL reported a steep decline in net profit to Rs 575 crore during FY09 compared to over Rs 3,000 crore in the previous fiscal.
BSNL CMD Kuldeep Goyal, however, denied that the company will face any financial pressure on account of 3G. “We have over Rs 37,000 crore in cash, putting us in a better position to pay the price for spectrum and for launching newer applications,” he told ET. “We already have highend subscribers and the offtake will improve when we complete our pan-India rollout by next year,” he said. BSNL expects to spend Rs 2700 crore in the first phase of deploying 3G in 760 cities, with 111 already having gone live.
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