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G. Rambabu

NEW DELHI, April 18

IN a significant decision aimed at warding off competition from the private sector, the Department of Telecommunciations (DoT) is likely to propose a cross-holding of equity between the two telecom behemoths, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL).

According to highly placed DoT officials, a cross-holding between the two companies would consolidate their operations and help them devise a common strategy to tackle competition in basic and national long distance services.

``We are looking at various possibilities at the moment. Although no decision has been taken in this regard, the cross-holding pattern seems the most viable,'' they said.

They noted that the idea cropped up after BSNL laid a claim on the Union Government equity stake in MTNL. The company had, in a written communique to DoT, said that the Government's equity in MTNL instead being disinvested this fiscal, should be transferred to BSNL.

While BSNL is a wholly owned PSU, at present 56.25 per cent equity shares in MTNL are held by the Union Government and the remaining 43.75 per cent held by foreign institutional investors, financial institutions, banks, mutual funds and others including individual investors.

BSNL had made this demand, following its apprehension that it may not be allowed to participate in the bid for MTNL when it comes up for disinvestment. Both the telecom PSUs were in fact not allowed to bid for Videsh Sanchar Nigam Ltd (VSNL), although it would have made a sound business proposition in terms of integrating their telecom operations all over the country.

While DoT has ruled out any wholesale transfer of the Government's equity in MTNL to BSNL, the officials noted that it is not averse to cross-holdings between both the companies if it could strengthen the operations of both the companies.

If the cross-holding pattern does materialise, it would stand to the advantage of both the companies, which are seeing declining average revenue per user (ARPU) in recent times.

While MTNL provides basic services in Delhi and Mumbai, BSNL is the service provider in the rest of the country which does not have that much of a revenue potential. What is more, it is saddled with the task of connecting unremunerative rural areas, which has been a huge loss making proposition.

The company is, however, the incumbent national long distance operator, which should make it an interesting buy for MTNL, which proposes to venture into this sector in the near future.

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