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Tatas dial telecom merger number

Mumbai, April 2: The Tatas are on their way to a consolidation that will fold their telecom firms into one entity.

“We will eventually be merging all our telecom activities into one,” Ratan Tata said at the extra-ordinary general meeting of Videsh Sanchar Nigam Ltd.

The man at the head of the Rs 48,000-crore conglomerate explained how his group would cope with the challenges arising from the end of monopoly for VSNL, the international call carrier, it acquired from the government.

“Bear with us for another one to two years for the mergers,” he told shareholders who had arrived to pass a resolution enabling a Rs 956-crore asset write-down.

The two-year period he referred to is the time the Tatas are willing to wait for the government to sell the rest of their equity in VSNL. Tata disclosed the process of buying more government stake had hit a wall because of the Centre’s insistence on “golden shares”.

The golden shares allow the government to retain the same voting right that it has with its existing stake of 26 per cent. “We are still discussing the compensation with the government for the early termination of the monopoly,” Tata said.

The plan to merge telecom activities did not surprise industry analysts, who have long seen it coming, especially after the Tatas decided to unify their telecom services under one brand — Tata Indicom.

Recent moves afoot at the group suggest that VSNL will be the hub where the Tatas’ telecom strategy will be crafted.

There are several pointers to this. First, VSNL accelerated its investment in Tata Teleservices, after the government introduced unified licence norms. Once a basic telecom company, Tata Tele now has a unified licence that gives the group a national footprint.

Talking about VSNL’s fixed asset write-down, Tata said the amount of Rs 956 crore would be adjusted against the share-premium account.

“It’s a drop-dead situation. If you do nothing, you die. If we adjust it, we will live a little longer. It’s more akin to cutting of your leg when you have cancer, to keep you alive,” he added.

He cited the example of Tata Motors, which had to write down assets a few years back, but which is now a rejuvenated auto firm.

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