The department of disinvestment is likely to miss the August deadline for finalising the strategic partner for Videsh Sanchar Nigam (VSNL) due to delay in completing due diligence by prospective bidders.
Since the public sector telecom major's investments (in physical assets and strategic alliances) are spread across the globe, the bidders are taking more time to complete the due diligence, sources familiar with the divestment process said.
Merchant bankers hired by the bidders said they were facing difficulties in valuing VSNL's investments made over aperiod of time in several privately-held foreign ventures.
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Major investments by the company include funds worth $50 million in South Africa & Far East Cable System, another $50 million in the Afro-Asian Satellite Communication and Rs 184.8 crore in the Sea-Me-We-3 optical fibre submarine cable system project. The sources said arriving at the "true market price" of these investments was difficult.
In addition to this, VSNL also has a strategic alliance with Mahanagar Telephone Nigam for tapping new telecom areas. The company's 40:40:20 alliance with Telstra and IL&FS is for providing VSAT services to domestic customers. It has also committed equity in Intelsat and the restructured Inmarsat.
Since the firm's investments in ICO Global Communications and some other projects have not yet offered any substantial returns, the bidders are cautious about the due diligence and the valuation of its asset base, said the merchant bankers.
Senior VSNL officials said: "Considering the present condition, we may not be able to finalise the partner by August 31. The Centre is expected to invite financial bids only by the first week of August now."
The strategic investors are now in the process of visiting several facilities of VSNL in the country, the officials said.
The delay on the part of the government in announcing the utilisation of huge cash reserves has also prompted the bidders to resort to a go-slow approach.
Other issues the bidders raise are lack of information on future revenue stream of VSNL and the Centre's decision to bar the firm from foraying into the cellular and the basic segments.
The government is yet to announce its detailed policy on inviting more players for the international telephony business in 2002. If the government puts some riders like foreign cap on telecom firms, competition would be restricted among the domestic firms. The bidders are keen to know about the impact on VSNL's revenue stream next year, an analyst said.