For three years, S.Rajagopalan has tried to fashion MTNL into a competitive telco. On the eve of his retirement, he spoke to BT's Suveen K.Sinha and Ashutosh Sinha about the years that were, and the challenges that lie ahead of MTNL. Experts..

S. RAJAGOPALAN

Age: 60 years Designation: CMD, MTNL Track Record: He was the CGM of the Tamil Nadu telecom circle before taking over as the CMD of MTNL on May 5, 1997. During his tenure at MTNL, the company went in for a GDR issue and launched its Net service. BT interviewed him because: His stint at the helm of MTNL has been eventful. And he is due to retire on June 30, 2000, having done the spadework for MTNL's entry into several new businesses.

Q. Mr Rajagopalan, on the eve of your retirement from Mahanagar Telephone Nigam Ltd (MTNL), how would you look back at your tenure in the hot seat?

A. When I came here in 1997, I had no experience in running a company. I was a pure technocrat running a department in the Tamil Nadu government. The first thing I did was buy a book called How To Read A Balance Sheet. Learning is a must. And I wanted to make myself comfortable with the numbers. Our GDR issue helped a lot. When international bankers pounced on me, I had no option but to handle them. Somehow I wanted to prove a point to these fellows.

In terms of numbers, there were 30 lakh telephones then. Now there are 40 lakh. Our capacity was 35 lakh then. Now it is 45 lakh. There were between 250 and 260 exchanges when I took over. Now there are 312. All are electronic. Many technological innovations happened in my tenure, but these were incidental. I was just a catalyst.

I also tried to enter other value-added services. The last three years have been a struggle. It was never a smooth affair. I had to fight all the time. Honestly, I tried to protect the interests of my company. I believed that I owed that to my shareholders. The government doesn't sometimes know what is good for it. There was a suggestion that I buy Rs 300 crore worth of Videsh Sanchar Nigam Ltd (VSNL) shares. I ducked that-said I'll take it to the board, then killed it.

Our income was Rs 4,096 crore when I took over. Today, it is Rs 5,300-5,400 crore. There has been a healthy growth.

More than anything, I am proud of the way (the) Mumbai (circle) has faced competition. I wanted to prove that even a PSU can successfully face competition. There has been a sea-change in attitude. I never minimised the threat perception. I told our workers that they were doomed. You have to be good to your customers. Even if you have a quarrel at home, once you're in office, you have to bloody well smile. Retaining a customer is easier than getting them back.

You haven't been able to extend MTNL's basic services into other regions though...

I tried my best to get into Chennai, and Calcutta would have been a logical extension. I don't think it will happen. Now, I am trying to enter NOIDA, Gurgaon, Faridabad, and other areas surrounding Delhi. And Kalyan and other municipalities in Mumbai. That will be a good thing.

Nor have you been able to find a strategic partner for MTNL.

At one point of time, France Telecom was interested. But I think it has to be a transparent process. The government, the owner, has to decide.

Why a strategic partner? Why not a total disinvestment by the government of its stake in MTNL?

My views on this are very clear. The government should have decided that once they invited private participation in the sector, they will not remain in it any more.

Are there strong reasons for the government to disinvest in your company?

There are three reasons for disinvestment. One, a company needs to infuse some capital but does not have the resources to do so. I don't face that problem: we don't need capital, and MTNL is a totally under-leveraged company. Two, I want some technology that's not for sale, and have to take on a strategic partner who can bring in that technology. Three, and this is especially true of MTNL, we do not have certain skills.

Like...

I do not know how to sell. People have always come to MTNL. That direction has to reverse in a competitive environment.

MTNL also lacks business processes. We simply follow some bureaucratic rules for giving telephones. There is a thousand page book on how to allot a telephone. That won't do. We cannot do business in this manner. We can teach ourselves business processes and then learn to behave and think like a private company. But I don't think we have the time to learn.

Service has to be sold like you sell soap. You have to attract people. The concept of getting people to register for a telephone has to go. Look at our application form. It has four pages. A private company will just ask for the name, address, bank account number, and details of where and when the phone should be installed. It will not ask for a payment first. It will first provide the service and then take the money. It is for this reason that I have been lobbying for a strategic partner. There is no point in trying to learn. We don't have the luxury of time.

Fine. What kind of strategic partner are you looking for?

I need someone who has experience in the areas I have enumerated. It can be a foreigner; it can be an Indian; it can be anybody. My key competence is in running a telephone exchange, operating a line, and billing. I have a large pool of manpower. I also have three marketing units. But at the end of day, when I see how many isdn connections they have sold... We just can't do this type of a thing. Take the case of our ISP business. You see so much of Mantra Online. Do you see anything of MTNL anywhere? We are a very good ISP. Yet, we don't even tell people what we have. We are like a grocer who has all the products but doesn't know how to tell people that. This can't go on forever and, I think, a strategic partner can help us here.

What about independent decision- making? Isn't that something that can make MTNL more efficient?

That's another reason why I am for disinvestment. This company should be governed only by the Companies Act. I must be answerable only to my Board of Directors. But today, I have too many masters. Tariffs, incentives, moving people, hiring people-everything should be left to the board. For the government too, this makes sense. If it reduces its stake from 56.2 per cent to, say, 45 per cent, the perception about the company changes. Now, the perception is that MTNL is a government company run in a bureaucratic fashion.

Decisions cannot be taken in this environment. If I take 10 decisions and two go wrong, fine, I'm answerable. However, there is always the fear about the people who will look at this. How will the government auditor view it? I don't think businesses can be run like this. The process of decision-making has to be faster. We have to take entrepreneurial decisions. We have to be willing to take risks. Suppose I decide that I don't want to be in telex services, for instance, I should be allowed to close it down.

Where does MTNL go from here? What are the challenges it has to overcome to retain its pole position?

It will not be possible to go on depending on basic services. We used to operate in a comfortable monopoly situation where we had the luxury of administered prices. We were not only providing a sub-optimal service, but doing it in a cost-plus fashion. Our margins were around 24 per cent. We were proud that all our capital needs were being met through internal resource generation. But people started questioning why existing customers had to fund the growth of the company. Why shouldn't MTNL approach the market place for money if it has any needs, was the refrain. Then, the regulator came in and started reducing charges. In the first phase of rebalancing, TRAI has reduced long-distance charges by 25 per cent and altered local tariff slabs. I believe the fat margins now available in basic service will soon come under tremendous pressure.

To grow in this context, MTNL needs a long-term strategy for itself. Basic service will remain the core business. But, at the same time the strategy should factor in the definite shift in Delhi and Mumbai from voice to data. My forecast is that, in five years, it will be 75:25; 75 per cent (of the revenues) from voice and 25 per cent from data-centric. At present, it is 93:7. In many countries in the world, it is 50:50. Leased line charges are coming down. This is a silent revolution that is happening. There is an inexhaustible need for bandwidth. And the opening up of the long distance sector is going to bring about another revolution.

What does this mean for MTNL's broad-band plans?

We are getting ready to service about 2,000 broadband customers across the two cities. We have two Asynchronous Transfer Mode (ATM) switches in place now. In a few months, you will see technology that provide speeds up to 9 mbps to high-end customers. Of course, the charges may not be the same as PSTN charges. We are also looking at multimedia services. Once you have the bandwidth, the entire world is open to you. But the fact remains that our basic services business will remain under strain, although the business will grow overall. The pie will grow, but we will have to share it with others, and our margins will erode.

Will that have an impact on the quality of service?

The quality of service will show remarkable improvement. For example, we have decided to bring the exchange as near the consumer as possible. The strategy is simple. No telephone exchange should be farther than 3 km from the consumer. One more idea is to link up around 250 buildings we have identified in each of the two cities we operate in with fibre loop. The idea is to provide larger bandwidth for our customers-more isdn connections and better last-mile connections. Technology is not very expensive. We really want to take competition head on and we must improve the quality of our service if we want to do this.

What about your cellular services? You've been reported as saying that you'll make the first call before your tenure ends.

I'm still hoping that I will make the first call before I retire. But it (MTNL's cellular service) will definitely take off in the next month or so.

There are fears among private cellular service providers that MTNL will use its land-line strengths to subsidise its cellular operations...

I was really surprised to see a write-up about a level-playing field in cellular services. But my only request is that the competition should first let us play. I'm waiting with my pads on. As far as tariffs are concerned, we have to go by TRAI norms but, so, far it has recommended only a ceiling. Operators are free to reduce tariffs on in-coming calls. In Calcutta, a company has tried free in-coming calls. Service apart, tariffs will be a big differentiator in this business.

What about your Net venture? Can you leverage your basic telephony strengths to make that venture successful?

The main concern about the Net is telephony charges. The government has written to TRAI, asking it to explore the possibilities of reducing PSTN charges for Net usage. If that happens, it will increase Net usage. (Subsequent to the interview, MTNL reduced charges for dial-up access by about 25 per cent although this move was yet to be cleared by the TRAI.)

There's been some talk of a NYSE listing for MTNL. When is it happening in this area?

I'm in the 'blackout' period, and am not allowed to say anything. But it certainly is on the cards. We filed our papers a month back. It normally takes six weeks to process them.

What kind of company are you leaving behind for your successor?

I'm leaving a company poised for take-off. But the right decisions have to be made. The one thing I wish to tell my successor is that he reports only to the Board. I never go to Sanchar Bhavan (Department of Telecom) unless summoned. And I've exploited the potential of the Board to its maximum. Between 1986 and 1997, the board met 82 or 83 times; in my three years in office, it met 43 times.

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