In the first ever indication of a possible merger of two public sector telecom companies, MTNL and BSNL, the government on Thursday said it was appointing advisors for synergising their operations.

"We are in the process of appointing advisors for synergising the operations of Mahanagar Telecom Nigam Ltd and Bharat Sanchar Nigam Ltd," Communications Minister Dayanadhi Maran said.

Asked if it was a prelude to the merger, he said: "You are free to interpret whatever you want to. It could be a merger, it could be taking over of one company by the other," he said.

The talks of merger of the two PSUs have gained momentum since Maran took over the ministry in May this year. In the same month, Department of Telecom held a meeting with former chairmen of BSNL and other senior officials of the PSUs to look at the possibility of a merger to beat competition from the private sector.

If merged, the combined entity will have a turnover of Rs 35,000 crore (Rs 350 billion) compared to its private sector rival Bharti which has a turnover of Rs 5,000 crore (Rs 50 billion).

Among the options, the government could be looking at the reverse merger of BSNL with MTNL as the latter is a listed company in India and abroad, or selling 5 per cent of BSNL's equity in the market to get a valuation.

Yet another suggestion that came up during the consultations was for creating a holding company to synergise the operations and safeguard the commercial interests of the two profit-making PSUs.

BSNL and MTNL together command over 95 per cent of the fixed line market share.

The proposed merged entity will be almost seven times the size of Bharti, going by revenues in financial year 2003-04. The total fixed line subscriber base for the entity will be more than 42 million, way ahead of its competitors.