rediff.com: VSNL defends Rs 12-bn invesment in Tata Tele

Videsh Sanchar Nigam Ltd on Wednesday defended its decision to invest upto Rs 12 billion in Tata Teleservices Ltd over a four year period to become a 20-26 per cent equity partner to develop and expand the latter's basic telephony services in six circles.

The total investment will be Rs 82.47 billion of which Rs 25.52 billion will come from the Tatas as equity contribution while Rs 12 billion would be VSNL's share for Andhra Pradesh, Tamil Nadu, Karnataka, Gujarat, Maharashtra and Delhi circles to build a customer base of 7 million in next seven years, VSNL director (operations) N Srinath told newspersons in Mumbai on Wednesday.

The balance equity would come from a non-Tata entity, which was yet to be finalised, he said adding the debt component would be Rs 39.22 billion in the project.

"The decision is irreversible," S K Gupta, managing director, VSNL, told reporters through video conferencing when asked if the company could rethink the decision.

"There seems to be some communication gap. We have not received any intimation from the government so far," he said on a query relating to Communication Minister Pramod Mahajan's reported outburst that the investment decision was a mockery of the divestment process.

Asked why the investment decision was taken so quickly after the privatisation of VSNL, Tata Industries managing director Kishore Chaukar said, "VSNL gets the equity at par which after one or two years will not be possible and also because of growing competition."

The top management including Kishore Choukar, managing director of Tata Industries, and N Srinath said the company was looking at more such investments in companies having no conflict with VSNL's interests.

They also indicated that a sub-committee that would finalise the details about investment might not have government's nominee and it would cosist of independent directors and others.

Chaukar said whatever was done was in accordance with the Companies Act and there was no violation of shareholders' agreement.

Asked if the decision could be blocked by the government, they said, "The share-purchase agreement signed with the government on acquiring 25 per cent stake does not visualise any veto power by the government nominee."

The Tata's had recently acquired 25 per cent stake from the government in VSNL at Rs 14.39 billion and another 20 per cent through open offer.

VSNL has also planned to invest Rs 5 billion in national long distance segment during the current financial year, Gupta said.



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