Govt must divest stake in MTNL, BSNL: Pitroda

The former telecom adviser to the Rajiv Gandhi government, Sam Pitroda, today said the government must go ahead with the merger of Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL).

He said unless the government divests a major chunk of its holdings in these companies, they will not be able to fight competition.

He, however, added that merger of these two was not the only solution to make them more competitive. "Merger of BSNL and MTNL is not the only solution. You have to make them more independent. You have to sell the bigger piece to the public," he said on the sidelines of the CII Leadership Summit here. He added that since the government was sitting on "a jewel," it may as well "cash it."

Pitroda, CEO of WorldTel and member of the National Advisory Council, said, "By merging them, the other one becomes public automatically, and then you go and sell a bigger piece of the shares so that the public owns a larger pie, and when government reduces stake from less than 51 per cent, they will have more autonomy and flexibilities."

"You need to create a competitive environment for MTNL and BSNL. They are being blocked by government procedures and processes to make decisions in terms of procurement and investments. Don't vacillate on merger, do it," Pitroda warned.

The government is expected to appoint a financial adviser for working out possible synergies between BSNL and MTNL by the first week of November. The adviser for the merger will evaluate all possible options and also the aspects, which have created roadblocks in the way of merger between the two public sector telecom companies.

Thirteen firms, including HSBC, Ernst & Young, JP Morgan, Lazard, ICICI Securities, Kotak Mahindra, SBI Capital, Boston Consulting and Accenture, have been shortlisted by a joint evaluation committee of DoT and Department of Disinvestment officials.

The Department of Telecom has decided on October 15 for submission of the expressions of interest (EOIs). The presentations and other formalities will take another 15 days.