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Merge BSNL, MTNL, say consultants

Thomas K Thomas in New Delhi

Top global consultants advising the government on the best option for the two telecommunications giants, Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd , to counter competition from the private sector have recommended a merger between the two state-owned firms.

Departme- nt of telecommunication sources said the general approach proposed by seven consultants - McKinsey & Co, JM Morgan Stanley, ABN Amro Rothschild, DSP Merill Lynch, JP Morgan, HSBC Security & Capital Marketing and KPMG Consulting - was to forge an equity partnership between BSNL and MTNL.

The sources said the recommendations of the consultants were the following: acquisition of BSNL assets by MTNL in a phased manner, MTNL merging into BSNL or vice versa, MTNL acquiring a controlling stake in BSNL, or combinations or variants of these.

They further said the recommendations were now being considered by the department and a decision would be taken soon.

In an attempt to strengthen the two firms and help them to take on the competition from the private sector, Communications Minister Pramod Mahajan had floated the idea of synergising the operations of BSNL and MTNL.

Subsequently, a committee under Telecommunications Secretary Vinod Vaish was formed to explore the feasibility of a merger.

The committee included D P S Seth, member, Telecom Commission; Prithipal Singh, chairman of BSNL; Narendra Sharma, chairman of MTNL; and Shyamal Ghosh, the administrator of the universal services obligation fund.

The committee invited merchant bankers to advise on the six options, including maintaining the status quo, that is having BSNL and MTNL as standalone entities and a simple alliance between the two.

The sources, however, noted that these two options did not find favour with the consultants in their proposals submitted to the department at the end of October.

To maximise shakeholder value, merger between the two became the most accepted option, they added.

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