Sunil Jain’s ‘Dial a disaster’ (October 19) presents a frightening picture of the state of affairs in the state-owned BSNL and MTNL. A joint committee of both these companies had turned down the investment in Kuwaiti telecom firm Zain and yet the PSUs went ahead and said they were interested. And the price being sought for a minority interest in the company is much higher than the market price.
What Jain has not written about is the capital productivity of Zain. In the MTN deal, it was not just the higher average revenues per user of MTN that were attractive, it was the tremendous savings in capital that Bharti would have helped MTN get — MTN’s utilisation of capital is very inefficient compared to Bharti, so once Bharti’s procurement team was seconded to MTN, the combined company would have benefitted to a large extent. None of this, however, will be available to a BSNL/MTNL/Zain combine. For one, neither will get a management role in Zain since their shareholding is limited. Second, they don’t have the management capability, a fact that is easily seen from their declining revenues and operating losses at a time when the telecom sector is growing like it has never before.
Sanjiv Seth, New Delhi
