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July 4, 2001
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Money > Business Headlines > Report July 4, 2001 |
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Bar on VSNL's bid for 4th licence to hit valuationBaburajan K & Arijit De The Union government's move to bar Videsh Sanchar Nigam from bidding for fourth cellular licences will see a drastic fall in the company's valuations. A section of the prospective bidders was expecting VSNL to utilise its huge cash reserves for funding its foray into the cellular segment. If the company was allowed to enter the cellular segment now, it could have helped rake in a higher valuation, besides revenues, merchant bankers advising the bidders said. VSNL was not allowed to enter the cellular and basic operations as Bharat Sanchar Nigam and Mahanagar Telephone Nigam are already present in these areas. The cellular licence conditions envisage that an operator cannot have stakes in more than one licence in a single circle. The government is the majority stake-holder in VSNL, MTNL and BSNL. Without identifying a perennial revenue stream, getting a steady bottomline and higher valuation will be difficult for the company. VSNL will be losing its monopoly in the international voice market next year, ahead of the planned schedule in 2004. Apart from the dwindling Internet business, the company has not yet entered any business segment and the only relief is its planned move to enter the national long distance telephony segment. For that also, VSNL is yet to submit the application. Though the limited mobility issue had earlier prompted the VSNL management to review its investment plans, the company was almost ready to bid for at least six major circles in the country. But the government move to bar international telecom players has put the management in dilemma. In order to finalise its cellular strategies, the company had mandated Salomon Smith Barney. Based on SSB's recommendation, VSNL had planned to bid for some cellular and basic circles. The prospective bidders for VSNL are believed to have approached the Centre to allow more compensation to end the monopoly ahead of schedule. They had argued that a free licence to enter the national long distance telephone business will not be adequate to compensate the revenue loss after 2002, sources said. The Centre is planning to complete the divestment of its 25 per cent stake in VSNL by August. Prospective bidders for the VSNL buyout include the Tatas, Reliance, Bharti, BPL and Videocon. Powered by YOU MAY ALSO WANT TO READ:
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