The Aditya Birla group, which had submitted an expression of interest for Videsh Sanchar Nigam Ltd (VSNL), has decided to withdraw from the state-run telecom major's privatisation process.
Confirming the development, senior group officials said VSNL does not quite "fit into the group's plans" for the telecom business. Other officials said the group felt VSNL was an "unattractive proposition" in the wake of private sector competition that could adversely affect the long-term future of VSNL.
Analysts and senior industry officials said there were major concerns over the future of VSNL in view of the government decision to allow private sector companies into international long distance telephony and the continuous decline in international voice tariffs. In addition, telecom industry sources said voice over Internet protocol (VoIP), when allowed, could adversely impact VSNL's revenues.
The Birlas are among the six domestic business houses -- the others being the Tatas, Reliance group, Bharti-Singtel, BPL-Sterling and Videocon -- to have shown interest in VSNL. However, not even one international telecom major has put in an expression of interest for VSNL because of the cloud over the long term future of the international long distance telephony business.
Analysts said VSNL's biggest attraction appeared to be its huge real estate assets spread across India and cash reserves in excess of Rs 4,000 crore. The government is yet to decide on whether to draw part of it through a special dividend.
Besides, with GDR holders having around 30 per cent stake in the company, the eventual stake a multinational company could have picked up in VSNL was limited due to the 49 per cent cap on foreign direct investment.
The withdrawal of the Birlas comes at a time when the due diligence exercise at VSNL was supposed to begin.
The department of divestment has said the VSNL divestment was on the fast-track mode and that the process would be completed by August.
The successful bidder would get half of the government's 52 per cent stake, and would have to make an open offer for an additional 20 per cent.
