Govt. to sell 7% of VSNL stake

Surojit Gupta

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

Thursday.

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

billion.

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."

Strengthen board



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

communications.

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

metal firms.

(C) Reuters Limited 2001.