Financial Daily from THE HINDU group of publications
Wednesday, Apr 02, 2003
Financial Daily from THE HINDU group of publications Wednesday, Apr 02, 2003 |
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Mergers & Acquisitions Info-Tech - Telecommunications MTNL shelves plans to invest in Lanka Telecom G. Rambabu
NEW DELHI, April 1 MAHANAGAR Telephone Nigam Ltd (MTNL) has shelved its plans to pick up equity stake in Sri Lanka Telecom (SLT), the premier telecom service provider in the island nation. According to official sources, although the MTNL board had considered the issue at length, as it appeared to be a good investment decision, it is now unlikely to go ahead with the proposal. The issue came up for discussion after the company was approached by merchant bankers with the proposal to invest in SLT, following which the board directed the management to undertake a feasibility study before giving its go-ahead. The sources also said that equity participation in SLT would have made Sri Lanka the sixth overseas country in which MTNL would have made its presence felt. The company has formed a joint venture called United Telecom Ltd (UTL) with Telecom Consultants India Ltd (TCIL), Videsh Sanchar Nigam Ltd (VSNL) and NVPL (Nepal Ventures Pvt Ltd, a Nepali company). It is operational since October 10, 2001 for providing WLL-based basic services in Nepal. MTNL, in a joint venture with TCIL, has also participated in the O&M proposal to Pacifictel S.A. Equador, and is in the process of getting feasibility and due diligence for participation in a joint venture in Kenya and as a second telecom operator in Mauritius. It is also in discussions to provide fixed and cellular line services in Malawi. The sources said that MTNL, whose monopoly is under threat in Delhi and Mumbai following the entry of private operators, not only in fixed-line services but cellular and WLL services as well, has been looking out for avenues to diversify its portfolio and increase its overseas presence. It was in this context that an investment in SLT would make sound business sense. However, after careful consideration, it was decided that the investments may not be a good option after all, they said. SLT has the largest customer base in telecommunications in the country and is the top established player in the industry with a digital network and extensive infrastructure, as its transmission backbone covers the entire island. The company is licensed to provide domestic and international fixed wireline and wireless local loop telephone on the 800 MHz frequency band, telex and telegram, leased circuits, data communication services, ISDN, satellite uplink and maritime services. An associate company of SLT, Mobitel (Pvt) Ltd, is also the second-largest cellular operator. The sources said that the whole issue cropped up when the Sri Lankan Government gave a notice for ending its formal five-year management agreement with NTT Communications of Japan last year. While the Government of Sri Lanka holds 61.5 per cent in the company, NTT Communications owns 35.2 per cent, with 3.3 per cent being held by the employees and public. SLT was privatised in 1997, when management control was handed over to NTT Communications. The Sri Lankan Government has been seeking to further dilute its stake in SLT, even while it has given a formal notice of termination of the management agreement to NTT.
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