ILD norms may put off VSNL divestment

Vandana Gombar in New Delhi

The delay in the finalisation of norms for opening up of the international telephony sector is likely to push Videsh Sanchar Nigam Ltd’s (VSNL) disinvestment to 2002.

Confirming that a “review” of the disinvestment timing was on, disinvestment secretary Pradeep Baijal said: “We are examining the stage at which the price bids should be invited. A consultation is one within the government and a decision on the timing would be taken in the next few days.”

Without the rules of the ILD market being clear, the Department of Disinvestment (DoD) seems disinclined to invite the price bids for VSNL, since that could invite allegations of foul play.

“The disinvestment process has to be above board. We do not want to hear that the ILD norms went in a particular direction because company A or company B is the strategic partner for VSNL. If price bids precede the ILD norms, there would be room for allegations like that,” sources said.

The Telecom Regulatory Authority of India (TRAI) is likely to finalise its recommendations on opening up of the international long distance (ILD) communications sector by November, 2001. The Department of Telecommunications (DoT) will then finalise the policy based on the recommendations, though it is not bound to accept them in toto. This could be a time-consuming process at the DoT’s end.

Sources said one of the problems with freezing the time-frame on disinvestment was that the DoT declined to commit to a time by when it would finalise the policy.

The government is divesting 25 per cent of its 52.97 per cent stake to a strategic partner who would also get management control in the firm. Another 1.97 per cent is to be divested in favour of VSNL employees. There are currently three bidders in the race for the government’s stake—Reliance, the BPL-Sterling-CenturyTel consortium and the Tatas.

Mr Baijal said that the first round of due-diligences had been completed and the second round was currently on.

It was the bidders who requested the government to put the price-bids on hold until the rules of the ILD game were clear. Sources said some bidders have also asked the government to postpone the ending of VSNL’s monopoly and opening up the ILD market to competition, currently scheduled for April 2002. As per India’s commitments at the World Trade Organisation, this date can be pushed back to 2004.

Bidders say that the delay in the VSNL disinvestment process, originally scheduled to be completed by mid-August, has hit the firm’s valuation. “We are too close to the end of VSNL’s monopoly. A prospective strategic partner will seriously consider starting ILD operations from scratch rather than taking on all the problems associated with buying into a government company,” said an official of one of the bidding companies.

In fact, this is the route which has been followed by Bharti-Singtel combine, one of the bidders which has opted out of the VSNL disinvestment race and announced its intentions to enter the ILD market when it is opened up.