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Security issues delay MTNL privatisation

Security concerns over privatising India's state-run telecom giant Mahanagar Telecom Nigam Limited are likely to delay a proposed sale of government equity in the firm, sources said.

A government official, who did not want to be identified, said that the government's telecom department was still drafting an agreement for potential bidders to ensure there was no breach of security.

MTNL provides fixed line telephone services for New Delhi and Bombay.

An industry official explained that as MTNL provided the telephone network for all the federal government offices in New Delhi and the big corporate houses in Bombay, a private partner could make the network vulnerable to tapping.

Although the Indian government has not announced the percentage of equity to be sold in MTNL, the firm is one of the most lucrative state-run firms being considered for a stake sale.

The Indian government is planning to sell 60 million shares of MTNL through a global depository receipt issue in the overseas market.

Another 28.3 million shares are likely to be offered for sale in the domestic market.

Funds received from the stake sale to a private partner and through a share offer are likely to fund MTNL's plans for expansion into mobile phone services as well as long distance telephony.

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