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

argued.

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