A bitter honeymoon

Uday Chatterjee
01 June 2002

“Basically this would mean forward integration for VSNL, which does not own customers. It is the access provider which owns the customer to whom VSNL will now have access,“ said a Tata group spokesperson.

At the time of the Tata group's acquisition of 25 per cent stake in VSNL, the group had said VSNL would be “a key component of the Tata group's holistic telecom strategy.“ It said it would be the ideal opportunity for the Tata group to seamlessly integrate its basic and cellular services with VSNL's presence in international long-distance telephony and Internet services.

Union Communications Minister Pramod Mahajan, who has raised strong objections to the VSNL board's decision to transfer Rs 1,200 crore to Tata Teleservices, has sought to issue show-cause notices to the two government nominees on the VSNL board. Mahajan has pointed out that permission from the central government should have been taken before any such decision was taken. The two government nominees may be asked to quit the VSNL board.

“When VSNL was divested in favour of the Tatas no such option was ever anticipated. The Tatas have no right to transfer resources from VSNL to any of their group companies without seeking permission from the department of telecommunications. This is totally unwarranted and strong action is being contemplated by Mahajan,“ say official sources.

“Neither VSNL nor the Tata group has received any formal communication from the government protesting the VSNL board's decision on 28 May to invest up to Rs 1,200 crore in Tata TeleServices,“ says Tata Industries managing director Kishore Chaukar. And a VSNL statement says the agenda for the board meeting containing this item was circulated one week in advance.

The board meeting was attended by both the independent directors and one government director (the other being out of India). The board deliberated on the agenda after a presentation made by the director (operations) of VSNL, said the statement.

On 28 May, there were reports that the telecommunications ministry had taken exception to the decision and that it was questioning the role of the government-appointees on the board. “We want to remove the confusion. We feel there has been some miscommunication,“ says VSNL managing director S K Gupta.