The Hindu Business Line : MTNL, BSNL may be synergised under one holding co

THE Department of Telecom (DoT) is looking at the option of setting up a holding company under which the operations of the two state-owned companies - Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) - will be sygnergised.

The two PSUs may become wholly-owned subsidiaries of the proposed holding company by proportionately swapping MTNL's shares with that of the holding company.

In other words the private equity holders in MTNL may get a stake in the holding company after the swap ratio is worked out, if the proposal comes through.

"The option will allow the two companies to be brought under a common board of directors with a common corporate strategy. This will enable the two PSUs to synergise their strengths under the holding company," said a senior DoT official.

However, a final decision will be taken after the consortium led by ICICI Securities submits its final recommendations to the Government.

ICICI Securities was appointed by the DoT as advisors for the project.

The idea is to find synergy between BSNL and MTNL in such a way that the two companies can leverage each other's strengths to effectively compete with the private operators.

"There are a number of options that we are looking at for the purpose including the possibility of BSNL buying out the Government's stake in MTNL," said the DoT source. MTNL is listed both on Indian bourses and the New York Stock Exchange.

The other options include direct merger of the two PSUs and making one PSU a subsidiary of the other based on competitive position, shareholder value and cost implication.

MTNL has already expressed its views against BSNL picking up the stake held by the Government in the company.

Currently, MTNL offers telecom services in the most lucrative markets of Delhi and Mumbai while BSNL offers services in other parts of the country.

While BSNL has the licence for offering long distance services, MTNL is restricted to local telephone services.

The restrictions on the two companies has put them at a disadvantage compared with large integrated private telecom players such as Bharti and Reliance which can offer all type of communications services across the country.

The move was first mooted the then Communication Minister, Mr Pramod Mahajan, on grounds that the division of the PSUs on the basis of geography did not make sense.

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