It looks like the telecom industry's version of the David and Goliath story.

Until two years ago Mahanagar Telephone Nigam Ltd was the colossus of the phone industry in Delhi and Mumbai and its market share in both cities was just short of 100 per cent.

How quickly that scenario has altered. Back in fiscal 2001 when it still ruled the roost, MTNL installed 237,238 new connections. That fell dramatically to 25,000 in the 2002. And the slide didn't stop there.

During the first five months of 2003 only 65,000 people took new connections compared to 70,000 who returned their phones. It was the first time in history that MTNL's numbers have fallen.

• Back in 2001 when it still ruled the roost, MTNL installed 237,238 new connections. In 2003, 65,000 people took new connections but 70,000 returned their phones
• MTNL's net profits have fallen 32.5 per cent to Rs 877.16 crore in 2002-03 compared to Rs 1,300.68 crore the year before
• MTNL can't enter markets outside Delhi and Mumbai so it is floating a new subsidiary which will invest in third world countries
• MTNL is introducing the latest technology and recently became the first company to offer short messaging services on fixed line phones

The result is that MTNL now only has 50 per cent of all phone users in Delhi and Mumbai.

Nevertheless, MTNL is hoping to script a fightback. It is on an equipment buying spree and is putting together packages to make itself more customer friendly.

Says R S P Sinha, acting chairman and managing director, MTNL, "We have certainly missed the bus but we have to make up and are putting together a blueprint for a revival strategy."

That revival strategy won't be a moment too soon. Even in the booming mobile segment where private operators like Airtel and Hutch have been growing at a rate of over 100 per cent and have added around 1 million new users, MTNL has been punching in all the wrong numbers.

It has managed to pick up barely 200,000 subscribers even though it launched over two years ago.

What's more, MTNL can't blame public sector lethargy for its slow progress. Its public sector big brother Bharat Sanchar Nigam Ltd has seized the opportunity and zoomed ahead to become the country's second largest cellular operator with 4.5 million users within just a year.

Or, look at limited mobility where companies like Reliance Infocomm and Tata Telservices have notched up more than 400,000 subscribers in Delhi and another 200,000 in Mumbai within just a few months.

MTNL, which was the first to launch limited mobility services way back in 1999, has barely 200,000 customers after all this time.

MTNL's poor showing in the marketplace is inevitably showing up in its bottomline. There has been a 32.5 per cent drop in the company's net profit to Rs 877.16 crore (Rs 8.77 billion) in 2002-03 as compared to Rs 1,300.68 crore (Rs 13 billion) in the previous fiscal.

Why has the corporation not been able to move into the fast lane? The biggest problem for MTNL, like in any other public sector company, is the mindset of its employees.

"The way we have been for years -- making the customer's life difficult, sending him from one counter to the other -- has to be changed now," says R L Dube, executive director, MTNL, Mumbai.

That, obviously, isn't the only problem. MTNL has been slow to boost the size of its network and it has been extremely slow about introducing new service features. That apart, it has also had a dismal record of creating awareness about its products.

In recent months the Communication Ministry has been pushing hard for results and MTNL is slowly lumbering into action as a result. In Mumbai, for instance, Dube is planning to push a customer-friendly approach in everything the company does.

How will MTNL go about its fightback? It is putting together a multi-pronged strategy to bring back customers. The first area to watch is pricing.

The fact is that MTNL still has one of the largest cash reserves in the telecom sector and it could use to create havoc in the price sensitive market.

Already it has moved on this front by bringing down the monthly rental for cellular users to Rs 49, the lowest in the country. It also slashed short messaging rates to 25 paise. More is expected very shortly.

Then, it's looking at ways to move into newer markets. One of MTNL's biggest problems is that it is locked inside Delhi and Mumbai and it can't expand to other parts of India. Therefore the company is now floating a new subsidiary, MTNL International, which will invest in foreign countries.

It already has investments in countries like Nepal and Mauritius. "Our plan is to move into third world countries where the telecom sector is being liberalised," says an MTNL executive.

On the technology front too, MTNL is finally moving ahead. It is trying to bring in the latest features and technology for its customers. For instance, it has launched a short messaging service on fixed line phones -- a national first.

Also, in a bid to address the large data market MTNL is turning aggressive on its Internet and broadband business. With over 500,000 Internet subscribers, MTNL is racing to the top spot with only VSNL and BSNL ahead of it.

Kobita Desai, telecom analyst, Gartner India Research and Advisory Services, gives the thumbs up to MTNL's Internet focus.

"The cost of retention is lower than acquisition. Although MTNL is limited by service area, data service for enterprise customers, Internet based services for consumer segments for entertainment or education are opportunities that can be leveraged upon."

MTNL is roping in its 30,000 PCO booth owners as resellers. Customers will now be able to buy MTNL products like pre-paid cards and calling cards from the nearest PCO booth.

The company is also getting into new business lines like digital signatures, which for instance, will enable subscribers to file income tax returns online.

Then, there's the 'Always on Internet' on Digital Synchronous Lines, which enables subscribers to surf the Net and take voice calls simultaneously.

Of course, most of its competitors already offer this service but its introduction is a sign that the MTNL is now responding quickly to the needs of the market.

MTNL is also putting together the infrastructure to cope with an increase in demand. Some time ago the company had to stop selling pre-paid mobile cards because it didn't have the capacity to cope. Now it's adding 800,000 lines for both cellular and limited mobility services.

MTNL is taking several initiatives on the customer care front as well. It will, for instance, shortly set up a single window system for customer interface or grievances.

From next month customers with queries of any sort can call 1500. A call centre will also be set up and there will be new measures like a paperless system of processing requests, documents and such.

MTNL will invest Rs 22 crore (Rs 220 million) to Rs 30 crore (Rs 30 million) in Mumbai alone to improve its IT systems.

It is also hoping to team up with BSNL to offer comprehensive telecom solutions to corporates. MTNL now has a team of 250 in place led by three general managers, which will work out customised packages.

At the other end of the market, MTNL is trying to make its basic telephone more attractive for customers. In October, it introduced a new Fixed Line Connection scheme aimed at the low-end of the market.

Under this scheme customers can have an incoming call facility at a monthly rental of Rs 100 instead of the regular rental of Rs 250. It has also waived the Rs 800 installation charge for new subscribers.

"We will attract a different segment that make few calls and need to keep tabs on their phone budgets," says Dube. It will also extend its Virtual Calling Card for even outgoing calls on this connection.

But there's one key question: is it too late? Will MTNL be able to get its act together quickly enough to take on the competition posed by a clutch of well-funded, aggressive private players?