BSNL - MTNL Merger back on track?

The merger of the two state-owned telecom service providers, BSNL and MTNL, is back on the government's agenda. The plan is to first list BSNL, the country's largest telecom operator in terms of fixed plus mobile subscribers, and then merge the two companies. MTNL currently provides services in Delhi and Mumbai and is listed on domestic bourses, as well as on the New York Stock Exchange.The government is in the process of finalising the IPO of BSNL. It plans to divest 10% stake and is looking to raise around Rs 40,000 crore. To win over the employees' union, it is also looking at providing them with Esops.The development is significant since former Communications & IT minister Dayanidhi Maran had put on hold the merger between the two PSUs as he felt that both companies worked better individually and were in rollout mode.With the objective of bringing about a higher level of synergy between MTNL and BSNL and strengthening their competitive position, DoT had appointed a consortium of consultants led by ICICI Securities to assist in the restructuring exercise more than two years ago.While suggesting several options for the merger between the two, the consultants had identified the acquisition of MTNL by BSNL, followed by BSNL's IPO as the best option.While BSNL had agreed with the consultants, MTNL had raised several objections. It was also suggested that a holding company be formed under which the two PSUs would fall.This was also shot down as it was felt that DoT already acts as a holding company for the two. The merger of the two state-owned tele- com service providers, BSNL and MTNL, is back on the government's agenda. The plan is to first list BSNL, the country's largest telecom operator in terms of fixed plus mo- bile subscribers, and then merge the two companies. MTNL currently provides ser- vices in Delhi and Mumbai and is listed on domestic bourses, as well as on the New York Stock Exchange. The government is in the process of finalis- ing the IPO of BSNL. It plans to divest 10% stake and is looking to raise around Rs 40,000 crore. To win over the employees' union, it is alsolookingatprovidingthemwithEsops. The development is significant since for- mercommunications&ITministerDayanid- hi Maran had put on hold the merger be- tween the two PSUs as he felt that both com- panies worked better individually and were in rollout mode. Withtheobjectiveofbringingaboutahigh- er level of synergy between MTNL and BSNL andstrengtheningtheircompetitiveposition, DoT had appointed a consortium of consul- tants led by ICICI Securities to assist in the re- structuring exercise more than two years ago. While suggesting several options for the merger between the two, the consultants had identified the acquisition of MTNL by BSNL, followedbyBSNL'sIPOasthebestoption. While BSNL had agreed with the consul- tants, MTNL had raised several objections. It wasalsosuggestedthataholdingcompanybe formed under which the two PSUs would fall. This was also shot down as it was felt that DoT alreadyactsasaholdingcompanyforthetwo.