MTNL net profit seen down 51% on year

Mahanagar Telephone Nigam Ltd is likely to see a 51 per cent year-on-year drop in net profit to Rs 226.2 crore for the October-December quarter, according to the average estimate of seven brokerages polled by Crisil MarketWire.

Revenues are also likely to fall 13 per cent to Rs 1,417 crore from Rs 1,620 crore. The public sector telecom company, which operates in the metropolitan cities of Delhi and Mumbai, will announce its third quarter earnings Saturday.

Net profit projection for the quarter is in the Rs 159.9 crore to Rs 312.9 crore range, while MTNL's revenue is pegged between Rs 1,367.4 crore and Rs 1,478 crore.

On a sequential basis, the company's net profit is seen rising 9 per cent while the revenue is likely to dip 6 per cent

Analysts said MTNL's net profit was likely to fall year-on-year since the company's fixed-line business was under pressure due to intense competition, which was eating into its market share and also pulling down tariffs.

The cut in both long distance and fixed-to-mobile tariffs was also likely to nullify gains from an increase in subscribers for MTNL's mobile service.

At the end of December, MTNL had 594,742 global system for mobile communication-based users and 4.62 million code division multiple access technology subscribers.

"There is clearly a lot of pressure on MTNL's fixed line business, which contributes 95 per cent of the company's revenue," an analyst with a local brokerage house said. "The fixed line ARPUs (average revenue per user) have come off sharply," he added.

According to a note by CLSA Asia-Pacific Markets, MTNL's net profit for the third quarter was also likely to fall sharply due to a high base as profits during the year-ago period were boosted by a change in the depreciation policy.

"With MTNL's net line addition under pressure 2 per cent QoQ (sequential) revenue will be led by rise in mobile net adds and higher usage," the CLSA note said.

Going forward, MTNL's margins and profitability were expected to remain under pressure as its fixed-line business suffered loses out to GSM and CDMA technology based services, analysts said.

Today, shares of MTNL closed at Rs 148.70 on the National Stock Exchange, up 3.55 per cent over Thursday.