The Telegraph
Since 1st March, 1999
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VSNL climbdown on Tata Tele plan
- Investment size whittled down to Rs 836 crore; stake offer reduced from 26% to 19%

Mumbai, Oct. 21: Videsh Sanchar Nigam (VSNL) will invest 30 per cent less in Tata Teleservices (TTL) than originally planned, and do so over seven years, not four.

In all, Rs 835.80 crore will be sunk into the Tatas’ basic phone company by the international telephone carrier they snapped up a few months back. That is down from the Rs 1,200-crore figure which sparked a row between the government and the Rs 40,000-crore group. In return for its money, VSNL will own 19.8 per cent of TTL against the 26 per cent it was promised earlier.

The announcement marks the end of a face-off that saw communications minister Pramod Mahajan accuse the Tatas of stripping assets of VSNL, in which the government still owns 26 per cent. “After exploring more opportunities, the committee reaffirmed the viability of investment in TTL,” a VSNL release stated.

Bombay House saw the outcome as a vindication of what it had believed all along. ICICI Securities (I-Sec), appointed to come up with a valuation of TTL, released a figure the Tatas claim is in line with their estimate.

The investment would be on a par, as planned earlier. This is based on I-Sec’s valuation of TTL, as well as those made by others. “The committee decided that VSNL’s investment should be in 19.9 per cent of equity so that it does not have to consolidate TTL’s books into its own,” the release stated.

Tata sources said the acquisition of Hughes, the basic telecom operator in Maharashtra, has helped scale down the project cost of TTL — from Rs 8250 crore before the buyout to Rs 7,530 crore after it.

However, what was not explained was why the planned investment in TTL will be made over a period of seven years, and not four as the Tatas wanted it to be.

The committee decided that of the Rs 835.80 crore that VSNL will fork out, Rs 636.80 crore will disbursed over the first four years. The rest will be made available in the manner, and at intervals, to be decided mutually.

The board, which gathered on Monday to consider the much-delayed investment in Tata Teleservices, held its meeting to debate the recommendations of the committee, headed by independent director and Eicher boss Subodh Bhargava. Other members were S. K. Gupta and N. Srinath from the Tata group and Yashwant Bhave, a government nominee on the VSNL board.

Set up on May 28 to go into the modalities of the Rs 1,200-crore infusion in TTL, the panel sought an extension on several occasions, and was given two more months after it could not finish its job by the August 15 deadline. Asked to suggest the size and price at which VSNL should pick up a slice of Tata Teleservices’ equity, it finally vouched for the viability of the deal.

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