Financial Daily from THE HINDU group of publications
Thursday, May 30, 2002
Info-Tech - Telecommunications
VSNL says it acted in its business interest -- No objection yet from Govt: Tatas
MUMBAI, May 29
NEITHER Videsh Sanchar Nigam Ltd (VSNL) nor the Tata group has received any formal communication from the Government protesting the VSNL board's decision on Tuesday to invest up to Rs 1,200 crore in Tata TeleServices, said Mr Kishore Chaukar, Managing Director, Tata Industries, at a news conference here on Wednesday.
The agenda for the board meeting containing this item was circulated one week in advance, said a VSNL statement issued at the conference.
The board meeting was attended by both the independent directors as well as one Government director (the other being out of the country). The board deliberated on the agenda after a presentation made by the Director (Operations) of VSNL, said the statement.
On Tuesday, there were reports that the Ministry of Telecommunications had taken exception to the decision and that it was questioning the role of the Government-appointees on the board. "We want to remove the confusion. We feel there has been some miscommunication," said Mr S.K. Gupta, Managing Director.
"The investment is a matter for consideration of the board and the decision is under the provision of both the Companies' Act and the shareholders' agreement and is not a shareholder reserved matter," said Mr Chaukar.
"This is not a sudden outgo of funds. It is an investment that will be made over three or four years for a share of 20 to 26 per cent in the company."
The new management of VSNL said the investment decision was in the interests of the very viability and survival of the company and did not constitute "asset-stripping."
The company would soon be up against competition such as the Bhartis, Reliance, MTNL and BSNL, which are integrated players with presence in access provision (basic or cellular), national long-distance and international long-distance services.
VSNL, with 87 per cent of its revenues coming from ILD services which provided no direct customers , would be very vulnerable, said Mr N. Srinath, Director, Operations.
"The decision to be an access provider is nothing new and was thought of by VSNL even before disinvestment," said Mr Gupta. VSNL had applied for basic licences for six telecom circles, but was refused permission on the grounds that the same promoter (the Government which also owns BSNL and MTNL) could not be present in the same area providing the same service.
This applies to any shareholder with even a 10 per cent stake in a company and still applies to VSNL in which the Government has a 26 per cent stake. "Therefore, the best option is a partnership with an existing company whose business interest does not conflict with VSNL's," he said.
Tata TeleServices, though loss making, was no different from any other telecom company that makes losses for the first five years or so on account of heavy capital expenditure, said Mr Chaukar.
TTSL's project cost for the next four years for its six licensed circles is around Rs 8,247 crore, with equity amounting to Rs 4,325 crore. Of this equity, the Tata group would be contributing Rs 2,552 crore, VSNL Rs 1,200 crore with Rs 573 crore coming from non-Tata sources. The projection is the company will have three to seven million customers in the next seven years.
Mr Srinath said the issue of which brand would be used in the case of services provided by VSNL, or by VSNL and TTSL together was yet to be decided upon. Issues pertaining to the ISP activities of Tata Nova, Tata TeleServices and VSNL would also be worked out, he said.
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