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Decision on VSNL dividend deferred

Shares of state-run overseas telephone monopoly Videsh Sanchar Nigam Ltd fell on Friday after a much awaited decision on a special dividend was put off. Officials belonging to VSNL and the Telecoms, Finance and Divestment ministries met earlier on Friday and traders and analysts had expected the meeting would announce a dividend of Rs 100 per share ahead of its privatisation.

But Pradeep Baijal, the senior official in India's Divestment Ministry, told reporters after the meeting that a decision on the dividend would be taken in the next 1-2 months, saying there was still no "consensus" on the issue.

VSNL's shares, which rose nearly 4.5 per cent in morning trade, were pulled down by the news, closing 1.55 per cent lower at Rs 344.85 on the Bombay exchange. The benchmark exchange index ended 0.4 per cent lower.

New York Stock Exchange-listed VSNL, India's largest Internet access provider, is rated as one of the top priorities for privatisation by the government this financial year.

The firm was widely expected to give its shareholders the special "pre-privatisation" dividend out of its reserves of nearly Rs 50 billion.

The government plans to bring its stake down to 26 per cent from 52.97 per cent by selling 25 per cent along with management control to a strategic partner and another 1.97 per cent to VSNL's employees.

Six bidders including three of India's biggest conglomerates -- the Tata, Birla and Reliance groups -- and separate consortiums led by telecoms group Bharti, BPL and Videocon have expressed interest in acquiring the firm.

Baijal said he expected the decision on the strategic partner to be taken by August and the transfer of control by December, well before the company loses its monopoly over the international calls business in April 2002.

ANALYSTS DISAPPOINTED

Analysts were clearly disappointed.

"They have disappointed the market. The share is bound to fall further. The only consolation is that the decision has only been deferred and not abandoned," an analyst at an European brokerage said.

Most analysts had expected the plan to win approval as a Rs 100 dividend would have fetched the government Rs 20.80 billion ($443.17 million) for its 52.97 per cent holding of VSNL's Rs 2.85 million equity and in dividend taxes.

Besides cheering the Finance Ministry trying to battle a tough fiscal situation, it would also have made political sense for a government keen to rebut charges it is selling state-run firms too cheaply.

Its sale of profit-making Bharat Aluminium Company for Rs 5.51 billion earlier this year ran into a storm of protests from opposition groups and employees who accused the government of selling it for too little.

At Rs 20.8 billion, the amount the government would receive from the VSNL dividend would be nearly four times the amount it raised from the sale of Balco.

The dividend would have also left other shareholders happy.

Nearly 30 per cent of VSNL's Rs 285-million equity is held as American Depositary Receipts.

Another seven per cent is held by foreign funds and the rest by employees and public shareholders.

For VSNL's nearly 3000 employees, most of whom hold at least 600 shares, the dividend would have fetched Rs 60,000.

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