Financial Daily from THE HINDU group of publications
Saturday, Jun 01, 2002
Info-Tech - Telecommunications
Mahajan warns VSNL of tough legal action
NEW DELHI, May 31
THE Union Communications Minister, Mr. Pramod Mahajan, has asked Videsh Sanchar Nigam Ltd. (VSNL) to revoke its decision to invest Rs 1,200 crore in Tata Teleservices Ltd., failing which he would resort to "every legal measure'' possible to block the move.
Speaking to newspersons here today, he noted that the company had "breached the Government's trust'' by declaring that it would go ahead with the investment plans despite dissent by the Government nominee, Mr. Rakesh Kumar.
Not wishing to divulge what measures he would initiate in case VSNL goes ahead with the decision, Mr. Mahajan said that the legal department of the Ministry was exploring all options.
In this context, he said that although the Ministry of Disinvestment had expressed a view that the decision did not breach the shareholders' agreement, he had no intention of discussing it with the Ministry.
Mr. Shourie's role ended as soon as management control was handed over. But being a 26-per cent stakeholder in VSNL, the Department of Telecommunications still had a say in the matter, he said
"Even if the decision is legal, and the VSNL board had not violated the shareholders' agreement, the fact remains that they have breached our trust. I would not have objected if only a hundred of crores of money were involved, but this is a case of Rs 1,200 crore, not small by any standards'', he said.
The Minister pointed out that the intentions of the Tata group (which has management control over VSNL) were clear from the fact that they had excluded the Government nominee from the sub-committee that had been formed for this purpose. "Hopefully the VSNL management will rethink its decision, because not only does it make bad business sense, but it is also unethical on its part to do so'', he said.
He wondered how any company could think of picking up stake in TTL that was yet to prove itself as a sustainable basic service operator. The only circle it is operating at present is Andhra Pradesh. The fact that the company holds basic service licences for four circles does not guarantee that it will be successful.
Moreover, the company was yet to achieve financial closure, apart from the fact that it, as also other five private basic operators, had not been able to fulfil the universal service obligations.
For that matter, he noted, that it would have made better business sense for VSNL to invest in Bharat Sanchar Nigam Ltd. (BSNL) or Mahanagar Telephone Nigam Ltd (MTNL). Both the PSUs had proved themselves as viable telecom companies and both were making profits. Why invest in a loss-making entity at all, he noted.
"The investment decision would only strengthen TTL, and not VSNL as it should be. In any case being a group company, VSNL is assured of the customer base of TTL for routing of ISD calls, and STD calls when its national long distance operations commence. Why would TTL route their calls on their rival's network? The argument that the investment was done to capture a readymade customer base does not wash'', he said.
Stressing that it was not a question of any personal vendetta, he pointed out that the Tata group was well known for its integrity. But as a stakeholder, he was duty bound to raise objections when he felt that it would harm VSNL's future interests and that was why he reacted so strongly.
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