Tata Power, the energy arm of the Tata group, is set to hive off its broadband business into a wholly owned subsidiary.
The board of the company will meet on January 20 to ratify the recast plan.
Senior Tata Power executives said the move was aimed at bringing a clearer focus on the respective power and broadband businesses, and to adhere to corporate governance norms.
Though the group was earlier looking at the option of merging the business either with group company Tata Teleservices or VSNL, no such decision has been taken.
"The broadband business will continue to remain a part of Tata Power," a company executive said.
The broadband arm, which is PBT-neutral, will continue to focus on Mumbai, which is almost 25 per cent of the total Internet market, as of now.
Tata Power had earlier planned to build a national fibre optic backbone, as a "carrier's carrier."
Tata Power has already invested Rs 500 crore (Rs 5 billion) in setting up a 600 km optic fibre network in Mumbai city and the Mumbai-Pune sector.
The power arm has heavily invested in the group's telecom operations. It is now the largest shareholder in Tata Teleservices, the group's flagship telecom arm, and has also invested over Rs 500 crore in the special purpose vehicle which bought VSNL from the government.
VSNL, the international long distance company, had initially planned to get into the broadband business in a major way, but with changing regulatory framework for the industry, and with the Tatas buying it, the company has decided to change its business model.
Tata Teleservices provides fixed line and limited mobility services in Andhra Pradesh, and has launched these operations in Tamil Nadu, Gujarat, Karnataka and New Delhi.
Tata Power has invested Rs 300 crore (Rs 3 billion) in Tata Teleservices' equity and paid an advance against equity shares of Rs 175 crore (Rs 1.75 billion).
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