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Privatisation of VSNL
Privatisation of VSNL
the Overseas Communication Service as a government owned corporate in 1986. y VSNL was the sole provider for overseas telecommunication service and infrastructure to private telecommunication operators. y Under pressure from the World Trade Organisation, the monopoly of VSNL over international long distance (ILD) voice service was removed in 2002.
Strategic Sale in April 2002 Tata s holding - 45% Government s holding - 26% Controversy over Rs 1200 crore investment in Tata Teleservices
Bidding Process
Reserve Price of Rs 1218 crores for 25% stake
SEBI takeover code needed bidder to purchase20% post bidding Tata bid Rs 1439 crores, Reliance bid Rs 1347 crores After takeover, Tata's - 45%, Govt. - 26% 1.97% given to employees
TTL C
tr v rsy
VSNL board decided to invest Rs 1200 crores in TTL Over 3-4 years for 20-26% stake 320Tatas Justifications
Extend VSNL s reach to basic services Part of Tata group s overall telecom strategy
Issue resolved
- VSNL board sets up a committee to review the quantum and valuation of the proposed investment
Government had made bad decisions in the past (ICO, Iridium) Legally, Tata was well within its rights Issue could have been handled better by better information availability to 26% share holder (government) (government) Bad publicity - Share prices fell from Rs 188 to 161 It also might have sent wrong signals to future disinvestments.
Val ati
Critics claim sale below actual value In the case of VSNL, share prices didn t go up as expected Advisers and professionals might not be disinterested parties Lack of accountability (vacuum in top management for a long period)
Even after sale, government has responsibility as a shareholder to ensure smooth functioning Ministry of Communication s questioning might be right, but should be through decision making structures and not in public Government should learn to Let Go
VSNL after sale and NOW Since 2002, VSNL has become a major player in the Domestic market. In 2008, VSNL has been rebranded as Tata Communications, a global Indiantelecommunications company. VSNL is now rapidly growing its retail & corporate presence under the Tata Indicom brand name through its products like high speed broadband, dial-up Internet, net telephony and has an internet subscriber base of over 8,00,000 subscribers.
Privatization of VSNL led to greater public expenditure accountability through higher return on government s asset formation Better quality communications for the citizen Strategic sale is good as it leads to less confusion among the governments roles as a policy formulator and a service provider