Vsnl Selloff May Falter For Second Time

The disinvestment of Videsh Sanchar Nigam (VSNL) is likely to get delayed further with the Department of Disinvestment (DoD) slated to miss the October 2001 deadline for finding a strategic partner for the government's 25 per cent stake.

This would be the second time in a row that the selloff process is getting deferred.

With no clear cut policies on the international long distance (ILD), national long distance (NLD) and voice-over-Internet protocol (VOIP)sectors, the two bidders -- Tata group and the BPL-Sterling consortium are apprehensive of putting financial bids.

The other bidder in the race is the Reliance group, while Birla, Videocon and Bharti Singtel consortium have already exited.

Some bidders have already communicated their apprehensions to the global advisors of the Union Ministry. With the Centre planning to finalise the international long distance (ILD) policy by December-end only, all bidders seem to have developed cold feet.

"As all the three companies have not yet submitted their financial bids, meeting the privatisation target is impossible," sources familiar with the development said.

When contacted, sources with BPL and Tatas confirmed the development, while Reliance executives declined to comment on the issue.

Earlier, DoD had set a timeframe of August to finalise the strategic investor for a 25 per cent equity stake in VSNL, but later postponed the deadline to October.

Recently, divestment minister Arun Shourie is reported to have said that privatisation of all PSUs would have an impact in the wake of developments in the global markets as foreign bidders may hesitate to participate in the disinvestment programme.

Except for BPL-Sterling consortium whose partner is Thaicom of the US, all other main bidders for VSNL are domestic companies. The terrorist attacks on US are not the only cause for concern for the lackluster in the case of divestment, say analysts.

Since the NLD business has no government policies, bidders are in a fix as VSNL is a key player. In such a scenario, companies are finding it increasingly difficult to value VSNL. The government has already offered incentives to VSNL to enter the NLD business, but has yet to finalise NLD policies.

The Centre is keen to allow private telecom companies to enter the VOIP market, a move that will take away VSNL revenues. Since bidders have not yet put a figure on the size of VOIP sector in India and the likely impact on revenues of VSNL, valuation of VSNL seems to have run into rough weather, sources said.

However, S K Gupta, chairman and managing director of VSNL earlier said that VSNL is an undervalued stock though it boasts of a stable business.

He feels that a new player in the ILD business will take at least one-two years to bring revenues and stabilise in the marketplace. The government is set to open the ILD arena by April 1, 2002.