Mtnl Wants 100% Arm

Mahanagar Telephone Nigam Ltd has submitted a proposal with the Department of Telecom (DoT) to float a 100 per cent subsidiary. According to MTNL chairman and managing director S Rajagopalan, DoT will take a decision within two months. "I don't think it should take longer than that," he said.

Rajagopalan said the reason for the proposal was "There should be no cross-subsidy between basic and cellular operations. Further, once we venture more and more into value-additions like the internet, we can have separate books for the core sector services like the basic and one for services like the cellular and internet." It should be noted that even the state-owned Videsh Sanchar Nigam Ltd has floated a 100 per cent subsidiary to separate core business from value-added services.

 

Meanwhile, MTNL has shortlisted the consultants needed to decide on the marketing partner for the cellular foray in Mumbai and New Delhi.

The final consultant, who will study the financial viability, the vendor financing facility and technological aspects of the strategic partner, will be announced within the next few days.

The consultants shortlisted are ICICI, IL&FS, and three foreign banks: Merrill Lynch, Goldman Sachs and HSBC.

According to the MTNL CMD, ICICI has a good prospect since it has conducted extensive studies on the telecom sector on behalf of MTNL. We are also looking at Merrily Lynch who were one of the lead managers for the MTNL GDR issue.

"MTNL's cellular project being a turnkey project, one needs aggressive marketing. And frankly we do not have much experience in this. Once the consultant is appointed, the tenders for a marketing partner would be floated this month end and the final selection of the partner would be made within two months," he said.

MTNL is looking at both foreign as well as Indian marketing partners for the cellular foray. An upfront payment would be involved for the marketing services by the partner. The MTNL CMD categorically denied future equity participation by the other. MTNL has some strategy for its cellular services, in addition to the attractive pricing aimed at the middle-class people.

Rajagopalan said, "We are studying different packages to storm the cellular market. For example, we are considering different packages like student community, elders who can be given some concession in the cellular tariffs. In addition, we are also looking into the possibility of introducing cellular package for school-going children. For example, there can be only two buttons on the handset to simplify the matter for children _ one for communicating with the father and one for the mother." These kind of packages will be the first of its kind in India, and MTNL will operate from the standpoint of volumes, and that is not difficult since it can attract customers from its basic to cellular with its lower-than-others tariff.

Meanwhile, MTNL has decided not to bid for the fourth and final bidding for basic telecom licences in 11 circles. The move has been prompted by the fact that previous bidding rounds in these circles were unsuccessful and in some cases the licence fees were so high as to make it unviable. "The first three bidding rounds were unsuccessful in these circles, and we expect the government to hand it over to us. If the governmnet invites us we will offer our services in these areas, but the bidding route will definetely not be taken by us. Secondly, even it we take the bidding route to offer our services in some of these circles, the liecenses are too high to make it viable, especially in areas like Jammu and Kashmir," Rajagopalan said.

The Telecom Commission had in-principle allowed MTNL to bid in the fourth round, which put the private operators on the edge. "The government has only stated that there could be second operator in these circles, it does not necessarily imply MTNL. Further, I have not yet taken the MTNL board approval in this issue," Rajagopalan added. "With these factors taken into consideration, MTNL's entry into these 11 cirlces as the basic operator is ruled out through the bidding route," he added. The Department of Telecommunications (DoT) had invited bids for the 11 circles of Assam, Himachal Pradesh, Jammu & Kashmir, Andaman & Nicobar islands, Kerala, West Bengal, Uttar Pradesh (East), Uttar Pradesh (West), Delhi and Orissa.