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Foreign telecom majors may opt out of VSNL race

Baburajan K

Leading foreign telecom players like Concert, the AT&T-British Telecom-promoted venture, MCI WorldCom, Deutsche Telekom, British Telecom and Hutchison Whampoa of Hong Kong are likely to shy away from bidding for the 25 per cent stake in Videsh Sanchar Nigam.

With this, the anticipated tough competition will be restricted to two of India's largest business houses, the Reliance group and the Tatas, while others like BPL and Bhartis should also be serious bidders.

Leading merchant banks in Bombay vying to get mandates from top international players for the VSNL divestment indicate that most of the telecom giants are turning a cold shoulder.

Merchant bankers indicate the prime fear is the continuous reduction in international voice tariff, with some experts predicting it could even become free in the long-term.

Besides, with GDR holders having more than 30 per cent in VSNL, the international bidder cannot hold more than 18 per cent because of the 49 per cent FDI cap in the telecom sector.

Some of the telecom transnationals are also under pressure from international banks for their huge exposure in 3G services. As the strategic investors will have to use hard currency for acquiring the stake in VSNL, many of them are not keen to put in bids.

Senior officials with MCI WorldCom, British Telecom, Hutchison Whampoa and AT&T, when contacted by Business Standard have indicated they were not keen on to picking up strategic stake in VSNL.

However, highly placed VSNL sources said the Centre is expecting a good response from prospective bidders. "Since April 10 is the last date for submitting the expression of interest, the final picture will be known only after a week's time," sources added.

They said domestic firms have already initiated informal discussions with VSNL's global advisors. Indications are that Tata Industries would form an alliance with other Tata group companies, while BPL may forge a tie up with France Telecom. Reliance and Bharti are in the process of framing their strategies.

Though the international carrier's stake can be acquired at a throwaway price due to fall in the scrip price, many companies are not too happy over future revenue projections as VSNL end its monopoly in the international voice business next year. The Centre is also going slow with its decision to offer a free national long distance telephony licence to VSNL, as part of the compensation package.

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