Learnings from a 13-day Miasma

When my lovely wife gets upset, she starts pacing around our house fast,
faster, and faster still. As her degree of agitation increases, so does her
speed of pacing. And with each step, she starts talking–faster and faster
still, her exposition of my some action getting more and more acidic. At such
times, I sit around grinning, content and not a bit contrite, priding myself on
this home and family that I have managed to build in my 32 years. No one else is
quite like us, I tell myself…

…Till VSNL’s SK Gupta, IT and telecom minister Pramod Mahajan and
disinvestment minister Arun Shourie come along and break my 15-month reverie.
This trio has not just walked and talked fast, but as the standoff over VSNL’s
proposed Rs 1,200-crore investment in Tata Teleservices has got stonier, they
have also put paid to all possibility of settling the family feud behind closed
doors. All three sides have tried to justify their stands in the 13 days that
the fracas lasted. But what has been mollifying is the fact that the matter has
dragged on for weeks in the public eye, placing a question mark over the
government’s disinvestment policy itself.

What price the resolution?
As this piece is being written, the deadlock is said to have been resolved.
An agreement has been reached between Mahajan’s ministry and VSNL, now being
run by the Tata Group. Much of the credit for the sudden compromise should go to
Tata Industries managing director Kishore Chauker, who camped in Delhi and spent
an entire day negotiating with senior officials of the department of
telecommunications. On the other side was Tarun Das, mediating for Mahajan, and
finally agreeing to water down the minister’s demand that the Tatas call
another VSNL board meeting to reverse the decision to invest Rs 1,200 crore in
Tata Teleservices.

And what of rumblings that VSNL is planning to offload its stake in Intelsat
and Inmarsat? The company has a 5.6% stake in Intelsat and holds 3.2% of the
equity in Inmarsat–what happens when these processes are kicked off? The Tatas,
with management control of the company, can push home these decisions tomorrow
if required, but having recently been bitten by the "I am still
watching" government bug, they are going to take their time before chewing
the clean-up cud again.

The Tata Group stuck by its stand that VSNL’s proposed investment decision
was in accordance with the shareholders’ agreement and the Company Law. The
strategy was to get direct access to the customers. After all, VSNL’s very
acquisition was aimed at providing the group with an ideal opportunity to
seamlessly integrate its basic and cellular services business with VSNL’s
presence in the international long distance, ISP businesses and its imminent
foray in the national long distance space. Against this backdrop, the Tatas were
only guiding VSNL along the path to growth and continued marketshare, it was

The DoT, meanwhile, got into act and demanded a review of the decision to
invest the monies in Tata Teleservices. It also insisted that the VSNL Board
sub-committee’s duties be redefined to reconsider the wisdom of dipping into
VSNL’s reserves in telecom operations, forgetting that between 2000 and 2002,
the government itself sucked Rs 1,900 crore out of the same reserves, before
privatizing the PSU. Perhaps Shourie has the answer to what was cooking in those
13 days–that the standoff reeked of a big, ugly corporate battle. There are
three other key players in the ILD space who want to corner the market before
others are allowed in.

What needs to be understood from the Tata-government episode, therefore, is
that this 13-day miasma goes far deeper than just the Tatas or the government.
It is a glaring symptom of the systemic inadequacy that we have learnt to live
with. Look at the larger picture–in terms of size alone, the divestment
process triggered off under Shourie’s stewardship is in its infancy. While the
government holdings (or part thereof) in PSU megaliths like Bharat Petroleum,
CMC and ITDC have been divested, there’re miles to go still. Already, bidders
are scared–ITDC failed to get bids for two hot properties, including the
famous Khajuraho Ashok.

At the end of the day, while there’s little wrong in the logic behind VSNL’s
plans to invest in TTL, the way it was handled smells of only one negative–
immaturity. A major decision within a month of disinvestment should have
happened after a formal intimation to the ministry. That would have avoided the
mudslinging and given the entire Tata strategy for VSNL the respectability that
it deserves.

Rajeev Narayan in New Delhi

Leave a Reply

Your email address will not be published. Required fields are marked *