Government to invite bids for VSNL by December end

Santosh Menon

NEW DELHI: The government plans to invite bids for state-run telecoms giant

VSNL and petroleum products marketing firm IBP Co Ltd. by the last week of

December.

The sale of Videsh Sanchar Nigam Ltd., a monopoly provider of overseas calls

and the country's largest Internet access provider, is billed as India's largest

privatization in a decade of economic reforms. "I expect that the bids will

be called towards the last week of December," Disinvestment Minister Arun

Shourie told reporters on Wednesday.

Shourie said government officials were working on a plan to distribute Videsh

Sanchar Nigam Ltd's cash reserves -- worth Rs 40-45 billion -- through a special

dividend to shareholders before its privatization.

The New York Stock Exchange-listed VSNL has already given out a generous

dividend to shareholders. In July, it announced a dividend of Rs 50 a share,

which included a Rs 40 special dividend.

The government, which holds a 52.97 per cent stake in VSNL, plans to bring

its holding down to 26 per cent by selling a 25 per cent stake along with

management control to a strategic partner and another 1.97 per cent to VSNL's

employees. India's largest private conglomerate the Reliance group, the Tata

group and a consortium comprising local firm Sterling Ltd. and two US companies,

TyCom Ltd. and Century Tel, are all in the race for VSNL.

Shares of VSNL closed 3.93 per cent higher at Rs 235.20 on the Bombay

exchange, whose 30-share benchmark index ended 0.20 per cent higher.

Shed control in IBP



The government, which holds 57 per cent stake in IBP, plans to sell a
controlling 33.58 per cent stake to a strategic partner. The announcement of a

timeframe for a sale of the stake clears the air of uncertainty that was created

by reports that the government was likely to delay the sell-off until it decided

on rules on the functioning of the petroleum product market.

On April 1 2002, India is set to dismantle its current administered price

mechanism (APM) for petroleum products under which the government sets the

prices of certain products, such as petrol, artificially high to subsidize the

sale of other products, such as cooking fuel.

Shourie said the bidders for IBP wanted to know details about the pricing

regime after the dismantling of APM.

"But many of the post-APM actions are to be a part of the budgetary

proposals. So it cannot be disclosed to them at this stage. But bidders can be

given sufficient indication so they know the road that they are going to travel

on," said.

Among companies expected to table bids are Royal Dutch Shell, Malaysia's

state-owned Petronas, and two of India's biggest refiners -- Reliance Petroleum

and state-run Indian Oil Corp.

(Additional reporting by Arif Sharif)

(C) Reuters Limited.