MTNL was the target of selling on Friday after its net profit came in way below even the lower side of analysts' expectations.

The scrip of the state-run telecom services provider slipped 3.32% to Rs 81.50 on BSE by 9:59 IST. A total of 19,722 MTNL shares changed hands on BSE by 9:59 IST.

MNTL has displayed a degree of volatility over the last few sessions as movement was determined by developments in the company and in the telecom sector. Between 17 and 23 January 2003, the scrip lost 6.54% to Rs 84.30 from Rs 90.20. In the three prior sessions (between 14 and 17 January 2003), MTNL had gained 10.9% from Rs 81.35.

The recent surge materialised on rumours that the company may come out with a huge special dividend in the current fiscal ending 31 March 2003. Over the last one month, however, fortunes have been different, with the scrip shedding 27.30% from Rs 111.90 on 11 December 2002 on concerns over future growth what with competition in the telecoms sector getting increasingly aggressive.

On Thursday, after market hours, MTNL said Q3 ended 31 December 2002 net profit fell 33.8% to Rs 217.06 crore (Rs 2.17 billion) compared to Rs 328.01 crore (Rs 3.28 billion) in the corresponding period of the previous year. Net sales decreased by 11.33% to Rs 1,463.15 crore (Rs 14.63 billion) from Rs 1,650.11 crore (Rs 16.5 billion) in DQ 2001.

The company was expected to, according to a capitalmarket.com poll of six telecom analysts, come up with a net profit of Rs 265.5 crore (Rs 2.65 billion) to Rs 301 crore and net sales of between Rs 1,476.5 crore (Rs 14.76 billion) and Rs 1,525 crore (Rs 15.25 billion).

Analysts feel that new and aggressive competition in the telecom sector is taking its toll on the company. And warn that still tougher days are in store for the PSU telecom service provider. Already funds have started moving out of the counter following concerns over the company's future growth prospects.

In the near future, the stock may be primarily sentiment driven. Reports of disinvestment and also the merger with Bharat Sanchar Nigam Ltd had led to high volatility in the MTNL scrip of late. Analysts say, with the financial performance of MTNL turning out poor so far, the only trigger for the company's stock is its possible disinvestment.

MTNL is engaged in basic telephony services in the two metros of Mumbai and Delhi. It also offers In

It also offers Internet and cellular services. The Government of India holds 56.25% of the to

total equity capital of Rs 630 crore, while institutions and the public hold 40% and 2%, respectively.

BSE Code: 500108