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Tuesday, Jan 28, 2003

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Centre to shed balance equity in VSNL

G. Rambabu

Mr Ratan Tata, Chairman, VSNL, with Mr S.K. Gupta, Managing Director, at the Videsh Sanchar Bhavan in Mumbai during the release of the book `The story of Videsh Sanchar Nigam Ltd'. The book encapsulates the history of the development of India's external telecommunications from its infancy in the 1850s till the disinvestment of VSNL in 2002.

NEW DELHI, Jan. 27

EXACTLY a year after the successful disinvestment of international long-distance major Videsh Sanchar Nigam Ltd (VSNL) in favour of the Tata group, the Government has decided to shed its remaining stake of 26 per cent in the company.

According to official sources, while an in-principle decision has been taken to completely exit from VSNL, a final decision will be announced soon after consultations with the Ministry of Disinvestment.

As of now, apart from the Government stake, Panatone Finvest Ltd, as the investing vehicle of the Tata group, owns 45 per cent equity and the overseas holding (inclusive of FIIs, ADRs, foreign banks) is approximately 13 per cent, with the rest owned by Indian institutions and the public.

The sources noted that with competition in the telecom sector hotting up, especially in the long-distance sector, it has been decided to exit from the company while the going is good. The Government cannot hope to get a greater price for its share in the company at a later date, with the revenues of VSNL already under pressure, they said.

They further noted that the changed scenario in the international long-distance sector, including sharp declines in international settlement rates and in interconnect rates with the other operators has had an adverse impact on the company's financials. In fact, as per the results declared recently, the company had to suffer a decline in income from operations by as much as Rs 1,238 crore in the first nine months of the current year as against the corresponding period in the previous year.

The net profit has declined by 46 per cent during the nine-month period. It has dropped from Rs 1,091 crore during April-December 2001, to Rs 589 crore in the same period in 2002. This is an alarming situation and it would be best for the Government to exit now. To top it, the share prices of the company have been declining, the sources said.

Moreover, they noted, although VSNL got a free national long distance licence (NLD) as part of the compensation package offered to it by the Government, it is still not decided about rolling out the services. The sources pointed out the first offer of the shares will have to be made to the Tata group and only then can it think of an open sale. Over the past couple of weeks, the VSNL shares have been quoting at around Rs 85 on the Bombay Stock Exchange (BSE), even as the fifty - two week high reads Rs 202. The scrip closed at Rs 83.45 on the BSE at close of trading on Monday.

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