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MTNL: Poised to tap broadband

December 07, 2010
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For Mahanagar Telephone Nigam Limited (MTNL), which has been continuously losing market share to the more nimble-footed, customer-centric private operators both in the wireless and wireline segments, broadband is a key area of growth. While broadband’s contribution to the company’s revenues has so far been limited, this segment is poised to take off with the launch of broadband wireless access (BWA) technologies in the country. But how MTNL capitalises on this opportunity remains to be seen.

While all other telecom operators competed for BWA spectrum licences this year, MTNL was allocated spectrum in mid-2009. However, it has not been able to roll out services yet. Moreover, the company had to shell out Rs 45.33 billion to the government for BWA spectrum, matching the winning bid amounts in the June 2010 auctions. In an attempt to overcome the effects of this huge cash outflow, the company has decided to rent out its BWA spectrum to a franchisee while making no investments of its own. The franchisee will deploy the Wi-Max system – the platform chosen by MTNL for offering wireless access – in MTNL’s operating circles. The franchisee will pay an entry fee and share revenues with MTNL, thereby adding to the company’s revenue streams.

Market position

MTNL’s ubiquitous wireline network is its strength and has positioned the PSU to offer extensive broadband coverage. “MTNL has the biggest opportunity in the country because the operator is present in the most lucrative circles of Delhi and Mumbai, and has the highest fixed line density in these cities,” says Kunal Bajaj, director, India, Analysys Mason.

The incumbent operator was the first in the country to offer broadband services using ADSL (assymetric digital subscriber line) 2+ technology in the country. The technology has helped the company garner over 90 per cent share in the Delhi and Mumbai circles.

The country’s internet subscriber base stood at 16.72 million as of June 2010. Despite being one of the fastest growing telecom markets in the world with a telecom subscriber base of over 7 billion, India’s broadband penetration stands at only 0.74 per cent. MTNL, with a presence in only two metros (Delhi and Mumbai) in India, accounts for 13.81 per cent of the total subscriber base (second to only Bharat Sanchar Nigam Limited, which has a pan-Indian coverage). MTNL’s 830,000 broadband subscribers are spread across Delhi, Mumbai, Nepal and Mauritius.

Recent developments

With the internet and broadband being the major demand drivers for MTNL, the company has been trying its best to hold on to its customers and maintain its leadership in the segment.

In early 2010, the operator increased the download speed for Mumbai’s broadband connections, doubling the speed for unlimited plans of 256 kbps, 384 kbps and 512 kbps, and increased the speed of 752 kbps and 1 Mbps connections by 46 per cent and 30 per cent respectively.

Recently, the company became the country’s first operator to introduce the next level of phone line broadband technology – very high bit rate DSL (VDSL). VDSL, the next version of ADSL, will increase the data speed offered by MTNL from 1-2 Mbps to 10-20 Mbps. The VDSL service will be useful for companies that require very high speed internet connectivity.

In an attempt to augment its internet networks, the company plans to buy international internet bandwidth from Bharti Airtel and Tata Communications. The additional bandwidth, which will cost MTNL Rs 1,578 per megabit per second per month for the Delhi operations and Rs 1,545 per megabit per second per month for the Mumbai service area, will help the operator expand its internet operations.

The company has also come up with innovative and low-cost broadband plans. In January 2010, it launched a plan offering free downloads of up to 200 MB for a monthly rental of Rs 49 in the Mumbai circle. MTNL has also launched prepaid broadband services for residential and enterprise customers in the city.

The way forward

Going forward, the biggest challenge for the operator is to improve the quality of its network as this would be a key differentiator in attracting a high level of customers. MTNL has lost significant market share to private operators in terms of fixed line broadband services, but the wireline segment continues to be an important asset. Says Bajaj, “As MTNL has a high fixed line fibre density, the operator can provide major backhaul and throughput on its towers with the advent of wireless broadband. With an extensive tower network in both Delhi and Mumbai, MTNL can also provide wide coverage.”

The operator has set an ambitious target of adding 1 million broadband subscribers in 2011 to its current customer base of 2.3 billion. With the requisite infrastructure in place and presence in two metros that have the largest internet and broadband subscriber base in the country, MTNL is poised to capitalise on the opportunity offered by the segment.

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