BSNL-MTNL losing share in mobile market

Even as India's mobile telephony sector has been able to buck the slowdown, the performance of government-owned BSNL and MTNL has been deteriorating, despite having a one-year lead in the launch of 3G services. According to DoT's latest data, both the companies are losing market share to private operators in the mobile telephony segment. BSNL and MTNL together are down from a 17% market share at the beginning of March 2008 to 13.6% in August 2009. In contrast, the private sector's share jumped from 83% to 86.4% during the same period. This worsening performance, according to analysts, could impact the valuations, as and when the government wants to disinvest part of it stake in these two companies. "The management and the government should focus on strengthening BSNL. Its existence has defeated cartelization and increasing of telecom tariffs. Listing will not solve any problem, except garnering funds for government," BSNL's Employees Union said on Friday, opposing both the listing and the deteriorating financial health of the firm. This compounds the challenges faced by telecom minister A Raja, who took over in May 2009 as this deterioration has happened entirely on his watch. The past year has been perhaps the worst period for the two companies, especially BSNL, despite its headstart advantage in 3G, which was created by the government in order to boost growth. It has been nearly one year since 3G services were launched by MTNL and six months after they were launched by BSNL. In contrast, depending on when 3G spectrum auctions are held, the private sector will be able to offer 3G services earliest by end 2010. BSNL began 2008-09 with a market share of 15.6% in the wireless space, falling to 12.5% in August 2009, while MTNL at 1.4% hit a low of 1% in August 2009. It is during this period that both companies launched 3G operations, hoping to capture not only higher revenues but also a new market segment. Even in the wireline space, BSNL and MTNL's position of dominance is slowly being eroded. The two firms jointly fell from a 89.4% share in March 2008 to 85.8% in August 2009. Meanwhile, the private sector increased its penetration by 34%, going up from 10.6% to 14.2%. Each of the two companies has been awarded 5 MHz of 3G spectrum in the 2.1 GHz band without any licence fee payments. However, they are expected to eventually pay an equivalent of the highest bid received for 3G in their respective circles once 3G auctions are completed. This means that the two companies may have to altogether cough upwards of Rs 6,000 crore depending on the bids received. BSNL and MTNL's financial health is likely to come under further pressure as more competition barrages the wireless space, including 3G offerings that could be commonplace by 2010-end.
Nitika
PGDM-3rd sem
sec-B