MTNL drops plan to acquire Sri Lankan telco Suntel

Launches 3G services in Mumbai under the brand Jadoo.

Mahanagar Telephone Nigam Ltd (MTNL) has pulled out from acquiring a majority stake in Sri Lankan telecom major Suntel, citing legal issues and high liabilities. The Indian company was looking at acquiring a 50 per cent stake and had quoted around $180 million (Rs 900 crore) for doing so.

“We have decided not to go ahead with our plans to acquire Suntel, as there are a lot of issues. We have also intimated our decision to that company’s officials,” MTNL Chairman and Managing Director RSP Sinha told Business Standard.

MTNL Director (Finance) Anita Soni said: “The company (Suntel) has a lot of uncertainties, including several court cases and financial liabilities. We were not sure which way the company was going, and being a public sector unit (PSU), we could not afford to run into legal issues”.

“It was not a viable option and we decided to withdraw our acquisition plans,” she said, adding, the company would look at other opportunities as they come by.

The Indian telecom service provider, now also listed on the New York Stock Exchange, had put in a bid to acquire the Colombo-based company, offering fixed-line services, in September 2007.

MTNL was accorded a preferred bidder status in March 2008 and was believed to be the highest bidder, quoting around $180 million.

Nordic telecom company TeliaSonera has a 55 per cent in Suntel, while Sri Lanka's Metrocorp, National Development Bank of Sri Lanka, Townsend of Hong Kong and International Finance Corporation hold the remaining stake.

Meanwhile, MTNL has launched 3G services in Mumbai under the brand Jadoo, making it the first operator to launch the service in the circle. The services would be commercially available from June 1. Global network major Alcatel-Lucent has begun rolling out the network for the company.

“We will incur an expense of around Rs 250 crore for the rollout of 3G services in Mumbai, and this follows our 3G launch in the capital. We expect to rope in one lakh customers by March next year," Sinha said.

The company is also considering demerger of its infrastructure into a separate company.