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Bharat Sanchar Nigam Ltd (BSNL) has sought telecom licences for Delhi and Mumbai — the two circles reserved exclusively for another state-owned company, Mahanagar Telephone Nigam Limited (MTNL). Delhi and Mumbai are among India’s biggest telecom markets, accounting for 30% of the total mobile subscriber base.

The move will most certainly be contested by MTNL, triggering a turf war between the state-owned telecom firms that have been sparring over various issues. MTNL recently alleged that BSNL was overcharging it for long-distance calls.

In its application to the department of telecommunications (DoT), seeking licences for Delhi and Mumbai, BSNL has tried to leverage a technical loophole. Since the current government guidelines stipulate that an operator cannot have more than 10% stake in two companies in the same circle, BSNL has applied for unified access service licences (UASL).

BSNL has sought to rationalise that MTNL has a basic and cellular service licence in Delhi and Mumbai, whereas it is seeking a UASL. Therefore, the guidelines will not be violated. DoT sources said the application was still to be examined. The government owns 100% of BSNL and 56.25% in MTNL, which is a listed company. BSNL believes it is on a solid wicket, legally. Its other logic is that the government has recently approved a national long-distance (NLD) licence for MTNL, allowing it to enter areas other than the original mandate of Delhi and Mumbai. The government must apply the same logic to its application and allow it to operate in these two circles, BSNL has said.

Telecom industry analysts interpret BSNL’s move in two ways. One, it’s an SOS call to trigger a fresh discussion for an early merger with MTNL, an issue pending for some time.

Two, it's a move to signal its desperation for entering India’s two largest markets as BSNL feels that staying away from the Delhi and Mumbai circles will hamper its growth. BSNL is the largest landline operator and the second largest GSM player with 18.29 million subscribers.