The markets received the news in a lacklustre manner with the MTNL scrip losing 10 paise on the Bombay Stock Exchange over its previous close to end the day at Rs 237.80.

While income from services during the period jumped 13.56 per cent to Rs 4,577.73 crore from Rs 4,030.87 crore, total expenditure went up by 22.65 per cent to Rs 2,393.56 crore from Rs 1,951.42 crore.

During the period, MTNL's interest burden came down substantially from Rs 147.62 crore to Rs 82.32 crore, a fall of 44.23 per cent. Its other income increased marginally by 3.82 per cent, from Rs 65.31 crore to Rs 67.81 crore.

The company improved its performanceduring the second half of the year by posting a 20.73 per cent growth in net profit to Rs 544.39 crore, when compared to the same period the previous year. Its income from operations also went up by 18.18 per cent to Rs 2,361.67 crore, reflecting faster growth during this period.

In December last year, MTNL, which provides basic-telephone services in New Delhi and Mumbai, completed a successful global depository receipts (GDR) offering of 70 million shares at Rs 235 per share, raising $418 million in the process. As a result, the government holding in the company came down from 65.73 per cent to about 55 per cent.

In February this year, the company's plans to provide cellular services in Delhi and Mumbai ran into rough weather with the Telecom Regulatory Authority of India (TRAI) invalidating its licence to provide the service. MTNL's licence was amended last year by the Department of Telecommunications (DoT) to include provision of cellular services, which was challenged by cellular operators. MTNL haschallenged the TRAI order in the Delhi high court.

While the company has a monopoly in its services, it is shortly expected to face competition in Mumbai with Hughes Ispat, the basic-service licence holder for Maharashtra, expected to launch its services in the next fewmonths.

INSIGHT

Per-line revenues dip

MTNL's operating profits have increased to Rs 2,184.17 crore, from Rs 2079.45 crore, but its operating margins have been under pressure, reducing to 47.71 per cent from 51.58 per cent. This is attributed to a 22 per cent increase in total expenditure to Rs 2,393.56 crore, thanks mainly to higher allocations for network infrastructure. Despite a strong line growth, the per-line revenues have fallen. This is because marginal subscribers, usually residential users, do not exceed the free-pulse limit and contribute only the monthly rentals, which amounts to Rs 2,280 per line in annual revenue. Also, the annual fixed expenses per line exceed Rs 3,700, which includes a licence fee of Rs900/line paid to DoT. Thus MTNL makes an operating loss on marginal subscribers. In future, any tariff rebalancing exercise like increasing the line-rental charges might lift its dwindling per-line revenues and improve profitability.