GAIL may spin off telecom subsidiary

GAIL India Ltd may to spin off its telecommunications business into a wholly owned subsidiary.

The division, known as GailTel, has been able to grow its business significantly in the first nine months of the current fiscal and is expected to break even soon.

"As the telecom business is expected to break even during this fiscal alone, GAIL is considering it to spin off into a strategic business unit (SBU). GAIL may even turn it into a wholly owned subsidiary later," U D Choubey, executive director of GailTel, said in Kolkata.

GAIL has invested Rs 250 crore in the business. It intends to spend another Rs 75 crore in the next one year for accessing the southern market.

The company will invest another Rs 300 crore to expand its optical fibre network (OFC) from 8,000 km to 18,000 km.

"The capex will coincide with the national gas grid programme," he said.

Moreover, GAIL may also lay OFC to create additional access in conjunction with GAIL's proposed city gas distribution business such as Blue Sky and Bhagyanagar.

GailTel provides internal telecommunication services and also commercial bandwidth services as a infrastructure provider in category II.

GailTel has installed capacity of 10 Gbps with activated capacity at 2.5 Gbps. It has already sold 48 per cent of the activated capacity. Choubey said the company intends to swap bandwidth with some private companies to access the southern market.

"Our business will grow significantly if we reach Chennai and Bangalore markets," he said. Meanwhile, GAIL has shown interest in picking up stakes in domestic and overseas petrochemical projects.

B S Negi, director (planning), said it GAIL is looking at two projects in Iran for picking up equity. Indian Oil is also learnt to have shown interest in those projects.

Negi said the Iran deals were likely to be finalised in the next financial year. On the domestic front, GAIL is also looking at setting up a gas cracker unit in the north-east and at Kochi.

It is also investing in Haldia Petrochemicals Ltd (HPL) in West Bengal. Moreover, the company has also lined up investments of over Rs 700 crore for its Pata petrochemicals plant in Uttar Pradesh.