VSNL privatisation by March: Pramod Mahajan

By : |September 30, 2001 0



Robin Elsham

MUMBAI: Telecommunications minister Pramod Mahajan indicated on Saturday the
sale of a controlling stake in international telecommunications monopoly VSNL to
a strategic partner may not be completed until March.

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That is half a year later than previously indicated and means the sale would
not close until just before Videsh Sanchar Nigam Ltd’s (VSNL) monopoly expires
on April 1, 2002.

Analyst have said the value of the stake, and therefore the amount the
cash-strapped government is likely to receive, declines with each passing day
towards the date when the Indian international phone market is opened to foreign
competition.

"We are just waiting for the telecom regulatory authorities to make a
final judgment on how the international long-distance market will be open – how,
when, in what way," said Minister of Communications Pramod Mahajan.
"Then the rates will be recorded, and the procedures will be completed by
March."

The Telecoms Regulatory Authority of India (TRAI) said early this month it
expected those details to be finalised by the end of November.

The government, which originally said it would wrap up the VSNL sale by
August, last month said it would do so in October. The government, which owns
52.97 per cent of VSNL, plans to lower its holding to 26 per cent by selling a
25 per cent controlling stake to a strategic partner and another 1.97 per cent
to VSNL’s employees.

The sale, the most significant in a decade of economic reform in India, is
being very closely watched now that the privatisation of national long-haul
carrier Air India appears to be grounded by a lack of bidders.

Shares of VSNL, which is also India’s largest Internet access provider, on
Friday rose 8.2 per cent to close at 212.15 rupees. The Bombay Stock Exchange
benchmark 30-stock index gained 3.54.

The shares are down 48.9 per cent from their 52-week high of Rs 415, but up
32 per cent from a 52-week low of 160.75.

April 1 market opening
Mahajan told a news conference in Bombay that the government had no intention of
delaying the opening of the Indian international phone market to private
competition."

"Let us be very clear. As a policy we believe in competition."
"So we have decided from 1st April 2002, VSNL’s monopoly will go,"
Mahajan said.

But he said VSNL was unlikely to face any competition in the international
service market for at least an another year.

"It won’t happen that from April 2 or 3, VSNL starts facing competition
because nobody else has even started working on that. I believe VSNL may have a
window of 12 to 18 months," the communications minister said.

Two of India’s biggest groups, the Reliance and Tata conglomerates, and a
consortium made up of India’s BPL Communications and Sterling Ltd and U.S.
companies TyCom Ltd and Century Tel have all signaled their interest in bidding
for control of the state-run telecom giant.

Privatisation plan
On Thursday the privatisation panel headed by Prime Minister Atal Behari
Vajpayee unveiled a revised plan to sell stakes in 13 state-run companies in the
current financial year.

In addition to VSNL, the companies include CMC Ltd., Hindustan Zinc, Hotel
Corporation of India, Hindustan Teleprinters, India Tourism Development
Corporation, IBP Co., Indian Petrochemicals Corp Ltd. and carmaker Maruti Udyog
Ltd.

New Delhi had earlier identified 27 firms for privatisation in 2001/02, and
analysts say the actual result is likely to fall far short of the government’s
target of raising Rs 120 billion ($2.5 billion) through asset sales in the year
ending in March.

(C) Reuters Limited 2001.

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