"As the target company is being run by highly-skilled professionals, to maintain its existing structure with regards to human resources and other policies, MTNL has in principle decided to limit its stake to 50 percent and is in talks to find suitable partners," the department said of MTNL in its annual report for 2007-08.
MTNL said it has been short-listed as the preferred bidder to acquire Sri Lanka's Suntel, which has some 300,000 customers.
Suntel is a CDMA technology-based fixed-line telephony service provider that is now a unit of Sweden's Telia.
MTNL has earlier been reported to have submitted a bid to acquire Suntel in the range of 100-120 million US dollars.
India's Economic Times newspaper said Monday that if Suntel were to be a 100 percent subsidiary, it will be subject to the policies and practices of MTNL.