The Hindu Business Line : DoT defers decision on VSNL stake sale

New Delhi, May 8 The Department of Telecom has decided to defer a decision on divesting its 26 per cent stake in Tata Communications (formerly VSNL) till the issue related to the company’s surplus land is settled.

The matter was discussed on Thursday by the Telecom Commission but no decision was taken after the Department of Economic Affairs informally indicated that the issue regarding land sale should be settled first.

The issue related to land sale dates back to the time when the Government decided to sell VSNL’s majority stake to Tata Group. Tata Communications Ltd has 773 acres of prime land, which has been put in the surplus pool, and is valued at over Rs 1,000 crore.

According to shareholders’ agreement between the Government and the Tata group, post-disinvestment VSNL was to be de-merged into two companies. One was to be the telecom company under the control of Tatas and the second a government-controlled company to administer the land.

The second part of the agreement, related to the surplus land, is yet to be executed. The Tatas had refused to bear the cost of hiving off the land into a separate company. As a compromise formula, DoT had earlier proposed to auction of the surplus land but this decision is yet to be ratified by the Cabinet Committee on Economic Affairs.

Meanwhile, the Tata Group expressed its desire to make further investments through Tata Communications. This would have requires a proportionate investment from the Government since it holds around 26 per cent in the company.

In order to give the Tatas a free hand in taking investment decisions, DoT proposed to sell the residual stake. However, this will require political support and approval of the disinvestment department.

The stake sale, when it happens, could fetch the exchequer about Rs 3,650 crore at current market prices as the company shares are trading at Rs 502 a share.

The Telecom Commission headed by the DoT Secretary, Mr Siddhartha Behura, met here to discuss divestment of the stake in the Tatas’ owned company but deferred a decision. Last year also, Tatas was given an option to acquire the remaining stake but the same could not be done as the agreement related to surplus land has not been resolved.

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