NEW DELHI: The Indian government plans to sell about seven per cent of its
stake in state-owned VSNL as part of a phased move to privatize the
telecommunications firm, federal Disinvestment Minister Arun Shourie said on
The government owns 53 per cent of the company, which is also the country's
first and largest Internet access provider with over 550,000 customers.
The government has been on a push to inject speed and credibility into its
decade-old privatization drive, which has consistently failed to meet targets.
"Immediately now, it (the government stake) will be reduced by about
seven per cent, of which 1.5 per cent will be given to employees, and the rest
in the market," Arun Shourie told Reuters in an interview. He said the
government's aim was to eventually cut its stake to 26 per cent in VSNL, one of
India's most cash-rich firms with no debt on its books and reserves of Rs 35-40
Shourie said the proposal to sell part of its stake in the monopoly overseas
telephony provider was likely to be discussed at a meeting next Tuesday of the
Cabinet Committee on Disinvestment, which must approve the plan.
"This will signal to the market the government's clear intention of
having a new type of culture in the organization as the government stake will be
substantially less than 49 per cent."
The government would strengthen the board of directors of the New York Stock
Exchange-listed Videsh Sanchar Nigam Ltd. (VSNL) by drafting well-known
corporate and public figures, he said.
The step would be aimed at making the sell-off process credible and create a
"firewall between the enterprise and the government", he said.
The government has announced plans to scrap VSNL's monopoly on international
calls and throw the business open to private operators by April next year.
Shourie said VSNL would be allowed to diversify into new areas and form
strategic alliances. Officials say the seven per cent sale would be followed up
by the strategic disposal of a larger chunk.
Shourie said Tuesday's meeting was expected to consider three or four more
privatization proposals including sale of state-run software services and
hardware maintenance firm, CMC Ltd. The government holds over 80 per cent of the
firm and plans to bring its stake down to 26 per cent.
Shourie did not give details about the proposal. Set up in 1976, CMC is one
of India's leading system integrators and has expertise in hardware maintenance,
real-time on-line systems transaction processing, image processing and data
The disinvestment department is overseeing the sale of government stakes in
30 state-run firms spanning a variety of sectors from airlines to hotels to
(C) Reuters Limited 2001.