Mahanagar Telephone Nigam Ltd (MTNL) is hiving off its Internet services, mobile telephony and other value-added businesses into a wholly owned subsidiary, Prime Telecom.
Prime Telecom, which will be registered and headquartered in Mumbai, will initially have an authorised equity capital of Rs 100 crore and a paid-up capital of Rs 50 crore. Later, it will form strategic joint ventures and also consider selling its stake to new partners at a premium.
The proposal is under consideration of the Telecom Commission and is likely to be cleared soon.
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"All the background work has been done. We are only waiting for the government's green signal," MTNL chairman and managing director S Rajagopalan said confirming the move.
Sources said steps have been taken to register the name `Prime Telecom' in Mumbai.
The subsidiary, which will have its own board of directors and managing director, will have functional independence. "It will also sport a strong market-driven culture essential for these value-added services," a senior MTNL official said. "Recruitment of front-office professionals will be from outside MTNL and enough flexibility will be given in the salary structure to attract the best talent," he added.
The move will help MTNL to maintain separate accounts for its basic service and the value-added services to avoid cross-subsidisation. "While the first will provide our bread, the second will be provide the butter," the official said. "This will also put paid to potential accusations by MTNL's competitors of subsidising our proposed cellular service from our basic service business," he added. Being functionally independent, Prime Telecom will be able to foster a market-friendly and professional work culture which MTNL lacks. According to industry experts, this alone will go a long way in making Prime Telecom a profitable company.
The new company will be able to bring in marketing customer care expertise through a joint venture, which is indispensable in cellular, Internet and other value-added businesses (like intelligent network services, virtual calling cards, voice-mail and video conferencing).
"As per our vision, Prime Telecom will be a lean organisation with its own people and its own offices, although it will sport the MTNL logo because of the inherent brand equity," the MTNL official said. "MTNL's basic strength is in technical areas and it needs outside support in marketing, front-office management and customer care to take on competition. Prime Telecom will have the necessary flexibility to overcome these challenges," the officials added.