According to reports in a leading national daily, a European telecom giant has informally conveyed to government officials that it is interested in picking up a stake in the company between a price range of Rs 250-300 per share.
MTNL (FY99 Revenues: Rs 52.47 bn), a public sector company, is a franchise of the Department of Telecom. The company has a 15-year telecom license to operate in New Delhi and Mumbai until the year 2013.
A strategic partnership with an international telecom company may be just what MTNL needs at this point of time. The company is facing competition in its, till recently, monopoly markets of Delhi and Bombay, even as its foray into cellular telephony services is yet to be permitted by the regulatory authorities. The company has also started providing internet access services. However, MTNL continues to suffer from poor standards of service, which are proving to be a major hurdle in its effort to retain and attract new clients for its various ventures.
An international partner will give the company access to the latest technology. This assumes significance in the light of significant breakthroughs in technology in recent times. Moreover, with internet being the driving force behind many large telecom companies, MTNL has to ensure that it continues to offer world class services to survive in this intensely competitive market.
Another advantage is that MTNL will be able to make a foray into international telephony services as and when the VSNL's monopoly expires in 2002. This will add to revenue growth and also diversify the company's business risk.
However, the government's unwillingness to offload significant stakes in companies such as MTNL could be a major hurdle. Other hurdles that may delay the process will be the issues pertaining to MTNL's large employee base.
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