MTNL has had so far on its 3G platform and the poor subscriber mix of the company. We agree that driving ARPU is the only available recourse in saturated metros, but in our view, the subscriber mix at MTNL is not suitable for 3G services and provides limited possibilities for ARPU improvement.

MTNL is in the process of inviting bids from global telcos to run its 3G operations in Delhi and Mumbai on a franchise basis for a 10 year period ; a clear acknowledgment of its poor execution capabilities in our view. 3G services require a segmented approach and close analysis of consumer behavior along with product innovation.

It makes no business sense for MTNL to match the highest bid for 3G spectrum auctions and incur capex to upgrade its network. MTNL is better placed to leverage its fixed line infrastructure for wireline broadband products. We believe metros have latent demand for high speed broadband.