MTNL sinks deeper into red,staff costs overtake income

While the spectrum row rages in the telecom sector,theres disturbing news from a government-owned telecom company on the financial front....

While the spectrum row rages in the telecom sector,theres disturbing news from a government-owned telecom company on the financial front. With costs rising and revenue from basic and cellular services falling,state-owned Mahanagar Telephone Nigam Ltd MTNL has reported a loss of Rs 1,573.7 crore for the fourth quarter ended March 31,2010 as against a loss of Rs 73 crore for the same quarter ended March 31,2009. For the full year ended March 31,2010,the company reported a loss of Rs 2,514.8 crore,while it had a net profit of Rs 211.7 crore in 2008-09.

Net income from operations for the quarter fell about 21 per cent to Rs 848 crore from Rs 1,069 crore previously. On the other hand,net income declined to Rs 3,654 crore for the full year ended March 31,from Rs 4,455 crore in the same year-ago period. However,MTNLs staff costs are much higher than its revenue from operations.

Total costs jumped more than two-and-a-half times to Rs 3,719 crore from Rs 1,386 crore because of higher expenses on staff and their retirement benefits. Staff costs more than doubled to Rs 1,129 crore during the quarter from Rs 439 crore because of a salary revision,while provision for retirement benefits jumped to Rs 1,579 crore from Rs 238 crore in the year-earlier quarter.

Even as staff costs and other expenses shot up,revenue from basic fixed-line telephony services fell almost 22 per cent to Rs 699 crore,while that of cellular services declined about 11 per cent to Rs 184 crore from Rs 207 crore. While telecom companies are resorting to steep tariff cuts and other attractive offers to win customers,MTNL has been struggling to gain and retain subscribers. It offers services in just two areas Delhi and Mumbai where competition is the highest.

The company said its results were finalised considering wage revision from January 2007,approved at its February 26 board meeting. For the full year 2009-10,staff costs were at Rs 2,136 crore as against Rs 1,438 crore previously. Provision for retirement benefits for the full year shot up to Rs 2.934 crore from Rs 688 crore. The high expenditure is quite disturbing. The company needs to revamp its operations, said an analyst.

MTNL shares declined 1.28 per cent to Rs 65.80 on the BSE on Thursday.