THE Mahanagar Telephone Nigam Ltd (MTNL) is in the dock again. There has been no updated telephone directory in Bombay and Delhi since December 1994 fromthe official MTNL printing contractor, M&N Publications. This violates the original agreement between MTNL and M&N to bring out a directory and a supplementary directory every year, with effect from 1993.
Typically, MTNL gives the printing contract of its directories to a private party. The deal: the contractor pays MTNL a royalty. The party that makes the highest bid gets the contract, which includes printing a main directory as well as a supplementary for five years. The contractor has to print the white pages of the directory, based on data provided by MTNL, free of cost. In turn, he can sell ad space for both the white and yellow pages while assuring the advertiser of reaching every telephone-owning house in the city. In 1993, M&N (co-owned by Tele-Direct International Inc, a unit of the Canadian telecommunications giant, Bell Canada Enterprises, and Tej Publications of the Delhi-based Tej Bandhu Group in a 60:40 partnership) got the contract by offering MTNL Rs 80 crore as royalty for the Bombay and Delhi city directories and supplementaries for five years. Typically, MTNL gives the printing contract of its directories to a private party. The deal: the contractor pays MTNL a royalty. The party that makes the highest bid gets the contract, which includes printing a main directory as well as a supplementary for five years. The contractor has to print the white pages of the directory, based on data provided by MTNL, free of cost. In turn, he can sell ad space for both the white and yellow pages while assuring the advertiser of reaching every telephone-owning house in the city. In 1993, M&N (co-owned by Tele-Direct International Inc, a unit of the Canadian telecommunications giant, Bell Canada Enterprises, and Tej Publications of the Delhi-based Tej Bandhu Group in a 60:40 partnership) got the contract by offering MTNL Rs 80 crore as royalty for the Bombay and Delhi city directories and supplementaries for five years.
Since then, it seems that many clauses of the agreement have been, for some reason or the other, ignored by MTNL in favour of M&N. M&N is supposed to pay 20 per cent of the royalty annually. Of the Rs 10 crore for Bombay for 1993, M&N has reportedly paid only Rs 4.6 crore. There are no signs of payment for subsequent years. The contract provides for a 21 per cent interest charge, compounded quarterly, on the unpaid royalty. No such payment had reportedly been made till this April. Besides the royalty, M&N the eye behind the delay in the was required to give a bank guarantee of Rs 1 crore per city as a cover for nonperformance. However, M&N's 1994-95 annual report does not indicate any such bank guarantee.
The agreement provides for a penalty of Rs 1 lakh for each day's delay in publishing the directory and Rs 50,000 for the supplementary. Released in December 1994, the supplementary for 1993 and the directory for 1994 were 16 and 10 months late, respectively. But no money was paid. The supplementary directory was printed on 36 GSM paper when the agreement asks for 40-plus or minus-2 GSM paper. MTNL does not seem to have complained about this. Further, it revised its print order to 11 lakh from the original 13 . lakh. Normal procedure would dictate re-- tendering if there is a change in the requirement, but no such re-tendering was resorted to. In spite of repeated efforts, Outlook could not manage to get a clarification from anyone in MTNL vis-a-vis the directory contracts.
Meanwhile, the privately-held M&N's 1994-95 annual report makes for interesting reading. Though M&N declares a loss of Rs 48 crore for the year officially, the situation may actually be much worse. The parent company acknowledges an operational loss of $20 million (about Rs 70 crore). Against securities of just Rs 3 crore and a share capital of Rs 1 crore, the company has unsecured loans—loans without pledging any security—of Rs 32 crore. The report indicates that 29 lakh directories were delivered. Reliable - sources, however, claim that fewer than eight lakh directories and three lakh supplementaries were distributed.
When asked to explain these discrepancies, Nikolas van den Bok, vice-president, - Tele-Direct, and chief general manager, M&N, replied: "How we manage our accounts is our business."
That M&N had misjudged business a potential in India is obvious. Against the the astronomical royalty it offered, the closest bid from a competitor was Rs 50.5 crore. The report indicates that 29 lakh directories were delivered. Reliable - sources, however, claim that fewer than eight lakh directories and three lakh supplementaries were distributed. When asked to explain these discrepancies, Nikolas van den Bok, vice-president, - Tele-Direct, and chief general manager, M&N, replied: "How we manage our accounts is our business." That M&N had misjudged business a potential in India is obvious. Against the the astronomical royalty it offered, the closest bid from a competitor was Rs 50.5 crore, about 40 per cent less. Printing 11 lakh directories, as required for Bombay alone, would cost over Rs 50 crore. Supplementaries would cost about another Rs 4 crore. M&N sold ads worth only Rs 10 crore of which, anyway, half the receivables were outstanding. Even if all the advertisers paid up, M&N would still need 10 times this amount in hand to stay in business. Just consider the penalties that M&N is supposed to pay up to MTNL for a delay in publishing the directories. By April this year, these charges had piled up to a whopping Rs 22 crore.
M&N blames MTNL for delay in delivery of telephone number listings—the data for the white pages. MTNL typically rushes to meet its annual targets for giving out connections only in the last few months. So bringing out the directory on January 1 (as per schedule) would mean leaving out a large, additional listing. M&N actually refused to honour the Calcutta directory contract it won because the local phone company had not updated its listing for four years. Tele-Direct also complains of several arbitrary duties slapped on the printing equipment and special software it tried to import. Recently, Tele-Direct officials in Canada also told The Globe and Mail, a local newspaper, that the Indian partner has been unable to "sway the government as much as they had expected"
. Tele-Direct has now decided to pull out of India. Confesses Thomas Bourke, chairman and CEO, Tele-Direct, to The Globe and Mail: "In the timeframe given, it could only get worse." The company wants to clear off its dues to both MTNL and suppliers and move out. The parent company has business interests in infrastructure areas like telecom in India which it obviously wouldn't want to jeopardise.
But as happened in the past, MTNL continues to shield its contractors. Since 1987, therefore, just three issues of the directory have been printed for Bombay. The situation isn't any better in other cities. And none of the three contractors (including M&N this time) have been penalised. As Tele-Direct prepares to move out, the old question re-surfaces: just when will the Indian telephone user have an updated directory?
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