MTNL, the government owned telecom operator, had around 348,000 3G subscribers, out of a total GSM subscriber base of 4.78 million, at the end of the financial year 2009-10. That means that only around 7.27 percent of MTNLs total subscriber base, in the high-ARPU, high-priced markets of Delhi and Mumbai, are 3G customers. At the current priceof 3G spectrum in Delhi and Mumbai, MTNL can be expected to pay the Government Rs. 55.71 billion. This works out to around Rs. 160,073 per existing 3G customer, and Rs. 11,643 per customer, assuming 100 percent conversion of MTNLs subscriber base to 3G.

Financial Results

During the quarter, MTNL suffered a net loss of Rs. 15,737.59 million, more than double the net loss of Rs. 730.39 million suffered during the corresponding quarter of the previous year. The loss is being attributed to provisions for retirement benefits on revised pay, including arrears, effective 1st January 2007, and the decrease of qualifying service for pension from 33 to 20 years of service, effective 1st January 2006. Staff costs increased to Rs. 27,077.16 million from Rs. 6767.88 million for the year.

Tariff reduction also hit MTNL hard, as income declined to Rs. 8,483.31 million for Q4-10, from Rs.10,687.95 million during the corresponding quarter of previous year. Still, its performance looks better than it actually was, due to an increase of Rs. 4967.38 million in Other Income from income tax refunds.

MTNLs Cellular segment revenue also declined year on year to Rs. 1839.71 for the quarter, as compared to Rs. 2074.51 for the corresponding quarter last year. The cellular business reported an EBITDA profit of Rs. 370.56, up from Rs. 354.92 for Q409.

For the full year, MTNL reported cellular revenues of Rs. 7147 million, down from Rs. 8471.15 million for the previous year. EBITDA profit declined to Rs. 1070.23 million, from Rs. 1794 million for FY09.

During the year, MTNL added just 607,777 GSM mobile phone customers, a fraction of what most private telecom operators add in a month.

Broadband & Internet

In its announcement of the results, MTNL gloats about becoming the second largest Internet Service Provider after BSNL, “despite its operations being geographically limited to the already saturated metros of Delhi and Mumbai, and stiff competition from other operators.” As a customer, I can tell you that this is certainly not because of great service from MTNL. MTNL and BSNL own a majority of the telephone connections to home in Delhi and Mumbai, and most other wireline service providers haven’t got distribution to match theirs.

During the year, MTNL added just 120,330 Broadband customers added, up 17.3% year on year, but if you look at its ARPU, the bottom fell out in Q4, as ARPU declined from Rs. 675 to Rs. 592. So did MTNL end up losing high-value customers? There have been significant quality of service issues in Delhi.

MTNLs total Internet subscriber base (broadband and dialup) is 2.309 million, of which a majority (1,493,821, around 65%) are still dialup connections, mostly post-paid.

Download: Financials