Financial Daily from THE HINDU group of publications
Wednesday, Mar 13, 2002
Corporate - Mergers & Acquisitions
MTNL may take stake in Sri Lanka Telecom
NEW DELHI, March 12
MAHANAGAR Telephone Nigam Ltd. (MTNL) is considering picking up an equity stake in Sri Lanka Telecom (SLT) - the premier telecom service provider in the island nation.
According to official sources, after being approached by merchant bankers with the proposal to invest in SLT, the MTNL board has directed the management to undertake a feasibility study before giving its green signal.
If cleared by the board, this would be the third overseas country in which MTNL is seeking to make its presence felt.
It had recently entered into a joint venture with VSNL and TCIL to provide fixed line services in Nepal. The company is also in discussions to provide fixed and cellular line services in Malawi.
While the sources declined to divulge the exact details of the proposal, they pointed out that at present the Government of Sri Lanka holds 61.5 per cent in the company, while NTT Communications, Japan owns 35.2 per cent, with 3.3 per cent being held by the employees and public.
SLT was privatised in 1997, when management control was handed over to NTT Communications. The Sri Lankan Government is reportedly seeking to further dilute its stake in SLT, even while it has given a formal notice of termination of the five-year management agreement to NTT.
As per the agreement which ends in August 2002, a six month notice had to be given to NTT, for renegotiating the terms and conditions with a view to concluding a new management agreement.
The sources noted that MTNL, whose monopoly under threat in Delhi and Mumbai following the entry of private operators, was now looking out for avenues to diversify its portfolio and seek greener pastures. Any investment in SLT would make sound business sense.
SLT has the largest customer base in telecommunications in the country. It is the most established player in the industry with a digital network and extensive infrastructure as its transmission backbone covers the entire island.
The company is licensed to provide domestic and international fixed wireline and wireless local loop telephone on the 800MHz frequency band, telex and telegram, leased circuits, data communication services, ISDN, satellite uplink and maritime services. It also has an international voice monopoly until August 2002.
An associate company of SLT, Mobitel (Pvt) ltd. is also the second largest cellular operator.
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