RailTel, BSNL sign MoU to share bandwidth

10 July 2003, The Economic Times

It's not the grand marriage that everyone was expecting, but RailTel has managed to finally persuade long-time suitor Bharat Sanchar Nigam to formalise a relationship for the sharing of bandwidth.

RailTel and BSNL signed an MoU today for the sharing of bandwidth and other telecom infrastructure, improving the coverage of BSNL's CellOne mobile service to provide continuous coverage along the railway track by utilising RailTel's infrastructure and extension of telecom facility to rural areas using RailTel's OFC network. 

In addition, BSNL will offer priority to RailTel for last mile and interconnect. At the signing of the MoU, it was decided MTNL will consider equity participation and BSNL will join hands with RailTel for utilising synergies, infrastructure and services for its various telecom services for bringing a telecom revolution to the masses.Marriage talks for MTNL/BSNL to pick up between 26-34% equity have been stuck on price, with RailTel demanding a hefty premium of Rs 30 to 40 per share as opposed to the Rs 10 per share that MTNL is looking to pay.

RailTel, a company the railways set up two years ago to offer telecom bandwidth through optical fibre cable (OFC) along its 62,000 km track network, has been riddled with start-up issues and has only managed to do business worth Rs 10 crore, way short of an earnings projection of Rs 700 crore in '01-02 and Rs 500 crore in '00-01.In fact, the delay in sealing a relationship with either MTNL or BSNL over the past two years forced the railways to direct three of its own PSUs to pick up a 15% stake in RailTel; IRFC holds 10% equity, while Concor and Ircon hold 2.5% each.

RailTel has been formed with an authorised capital of Rs 1,000 crore with the railways contributing Rs 510 crore.

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