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THE steering committee of the department of telecom (DoT) has rejected the merger proposal of BSNL and MTNL as proposed by the consortium of consultants led by ICICI securities. The counsultants in its final report had recommended that the two PSUs be synergised under a holding company. The steering committee of the department of telecom, which is studying the consultants’ report, has now said that a similar concept is already in place. "It may be mentioned that DoT is more or less working as a holding company of the two PSUs," the steering committee said. The steering committee has pointed out that there was variance between the initial and final reports submitted by the consortium consisting of ICICI Securities, ABNAMRO, Rothschild, AG Ferguson and Co and Desai and Diwanji.

In the initial report, the consultants, while stating that the holding company would help PSUs derive price and value optimisation, had warned that under this system, the unified chain of command objective may be lost as this may result in the management similar to the existing one. But, in the final report, the consortium of consultants had said that the holding structure could facilitate and enable higher level of synergy between BSNL and MTNL as against the existing operational structure. The final report states that this structure can help to combine the strength of both the companies where the strategic, marketing and business development decision of the two subsidiaries would be taken by the holding company.

"There can be significant cost savings that can be achieved, especially in area of capital expenditures and asset utilisation. The holding company structure would have low transaction costs and can be put in place. Issues like parity of staff costs and maintaining the status quo of MTNL’s US listing can be addressed in a phased manner."

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