The government is considering buying back shares of Mahanagar Telephone Nigam Ltd from the market as one of the options to pave the way for its merger with Bharat Sanchar Nigam, which is not listed on the bourses.
This was discussed during a recent meeting chaired by the Communication and IT Minister Dayanidhi Maran along with two other options like creating a holding company for both the public sector units or offloading about five per cent of BSNL's equity in the market, official sources said.
Buying back of MTNL's shares from the market means that the government would have to delist from the bourses to make it a 100 per cent subsidiary of government like BSNL.
By doing this, the government may be trying to remove the legal hurdles that may arise as a result of the merger of a listed company -- MTNL -- with the unlisted BSNL.
This was just one of the options being discussed, sources said adding, that no banker or advisor had so far been appointed to look into the pros and cons as well as methodology of the merger between MTNL and BSNL.
Everything is being discussed internally within the departments. If this materialises, sources said, the government may have to shell out more money to buy back MTNL's shares as the share price may move upwards.
The other two options were also being considered especially offloading five per cent of BSNL's equity in the market to know the valuation of BSNL.
Pending the decision on merging MTNL and BSNL, the government is unlikely to consider BSNL's request to operate in MTNL territories -- Delhi and Mumbai -- as this would clash with the proposed merger plans of the two PSUs.
While sources added that no final decision has been taken in this regard, allowing BSNL to operate in Delhi and Mumbai would weaken MTNL and may not get favourable response from various quarters, sources added.
Presently, the government holds about 55 per cent equity in MTNL, which is listed in Indian bourses as well as at New York Stock Exchange.