Without doubt, it was the bombshell dropped by the telecom minister that drove shares of state-owned telecom major Mahanagar Telephone Nigam Ltd (MTNL) into a tailspin. The market reacted sharply to the proposed merger between MTNL and older brother Bharat Sanchar Nigam (BSNL). And predictably so, as it ruled out all likelihood of MTNL's divestment in the near future. Divestment had been one of the major triggers for the stock in recent times. Ironically, only a few weeks ago, a panel was set up under the aegis of the disinvestment commission to prepare a report on the disposal of government interest in MTNL and BSNL.
The decision to merge the two state-owned telecom majors is clearly not in the interest of MTNL's minority shareholders. The delay in privatisation, essentially, wipes out all hopes of a decent open offer price or large dividend payouts. Prior to its divestment, Videsh Sanchar Nigam (VSNL) had distributed the free cash on its books through hefty dividends to its shareholders. Similarly, investors had been expecting the government to suck out the over Rs 3,000 crore of cash with MTNL, which amounts to around Rs 45 per share.
If that wasn't enough, the minister also seemed to be against the idea of granting an international long distance telephony (ILD) license to MTNL. An inability to enter the ILD business would have only stifled the company
