Our Bureau

New Delhi, March 11

ICICI Securities has recommended making Mahanagar Telephone Nigam Ltd a subsidiary of Bharat Sanchar Nigam Ltd as the best option to find synergy between the two public sector companies.

In a report submitted to the Government, the advisors have also suggested a direct merger of MTNL with BSNL as one of the options.

The Department of Telecom has called for a meeting on March 21 to discuss the options given by ICICI-Securities, the consultant appointed by Government to look into the possibilities of a BSNL-MTNL synergy.

They said that in case MTNL becomes a subsidiary of BSNL, as suggested in option one, then the boards of the two companies will remain independent. An initial public offering of BSNL will also have to be done even as it picks up the 56 per cent stake owned by the Government in MTNL at market price, officials said. MTNL has, however, expressed reservation against the subsidiary option.

DoT officials said that the process will be carried out in phases.

Top officials from BSNL, MTNL and ICICI Securities will attend the crucial meeting on March 21.

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.

While MTNL is listed both on Indian bourses and the New York Stock Exchange, BSNL is wholly-owned by the Government.

At present, MTNL offers telecom services in 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 to large integrated private telecom players such as Bharti and Reliance which can offer all type of communications services across the country.

(This article was published in the Business Line print edition dated March 12, 2005)
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