| burden of controversy
New Delhi, Oct 20: ICICI, asked to come up with a valuation of Tata Teleservices (TTL), has suggested that Videsh Sanchar Nigam (VSNL) invest Rs 800-900 crore in the Tatas’ basic phone arm over three years — not Rs 1,200 crore in four years, as planned earlier.
ICICI said each share of Tata Teleservices — in which VSNL would hold 25 per cent if it had gone ahead with the funding plan— is worth Rs 10-14. Last year, JP Morgan had valued it at Rs 10-11 per share while recommending that Rs 4,800 crore be invested by 2006. Tata and VSNL officials refused comment on the new valuation.
The Tatas asked ICICI to compute the worth of TTL — a company that has been offering services largely in Andhra Pradesh. By doing so, they accepted a key government demand after the VSNL board approved the funding proposal. The government holds 26 per cent in VSNL, while Tatas control about 45 per cent through Panatone Finvest.
“We will submit ICICI’s recommendations to the sub-committee on Monday. It will then be debated and forwarded to the government, the Tatas and the VSNL board. ICICI has also suggested new areas in TTL where money can be pumped in,” VSNL officials said.
The sub-committee comprises three directors — Subodh Bhargava, N.K Srinath and S.K Gupta. It was constituted after communications minister Pramod Mahajan questioned VSNL’s decision to invest Rs 1,200 crore in TTL.
In a tiff that continued for close to two weeks, the government maintained that its nominees were not informed of the decision. The Tatas contended that stock exchanges were told about it, and that all directors approved the infusion. Later, an agreement was reached and a sub-committee appointed to settle the row.
The panel’s terms of reference included studying and deciding the quantum and valuation/price at which VSNL will invest in TTL at various points of time. It was also supposed to suggest the doses and frequency of the injection.
The panel is negotiating, finalising and executing shareholders’ agreements and other contractual arrangements with TTL to protect the interest of VSNL in the investment. It is also setting milestones with which the investment will be linked, apart from advising the international phone carrier in the process.
Its most important mandate, however, was to find new investment openings in TTL and draw up a list of these to the VSNL board.
Asked how VSNL had gone in tying up inter-connect deals with state-owned telecom companies, a Tata official said: “This is not an issue related to the mandate given to the sub-committee. A meeting on this matter has been held with the deputy Prime Minister Lal Krishna Advani on more than two occasions. We will have another one, where finance minister Jaswant Singh and communications minister Pramod Mahajan will participate. This is expected soon.”
At the same time, the official said VSNL is in talks with Bharat Sanchar Nigam and Mahanagar Telephone Nigam to reach a deal that is mutually acceptable. “If they are able to agree on revenue sharing, it will be discussed at the meeting,” he added.