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July 21, 1997


VSNL inviting fresh proposals for regional hub

The Videsh Sanchar Nigam Limited is inviting fresh proposals from AT&T, Unisource, BT-MCI and Sprint International for its proposed joint venture for setting up a regional hub in the country.

The move clearly signals a burial to its earlier proposal of setting up a joint venture with British Telecom.

The public sector telecom major is understood to have taken this decision under pressure from the communication ministry which was insisting on "transparency" in selection of partners for the joint venture.

The communication ministry has been insisting that VSNL should demonstrate that it has selected the "best possible" partner under the prevailing circumstances.

However, the original BT-VSNL joint venture proposal is awaiting the nod of the Cabinet Committee on Economic Affairs.

Initiating the process, VSNL has drafted a letter to be sent to these aspiring global carriers. The letter contains details of the proposed over Rs 15-billion mega project. It also seeks information about the aspiring companies and their vision so as to enable VSNL "to objectively evaluate the suitable partner for the strategic alliance". The letter will be dispatched within a week.

As envisaged, the joint venture partners will bring in 80 per cent of the project cost. The remaining 20 per cent will be met through debt mobilisation by the joint venture company.

The equity participation at initial stages has been kept flexible to leave scope for other Indian companies to join the venture.

In the BT-VSNL proposal, the two carriers had committed $200 million for the project and $100 million was to be mobilised through debt.

According to the invitation draft, the joint venture will focus on establishing and marketing the hubbing capability in South Asia, West Asia and Africa, and further diversity into wider range of network products as and when regulation allows.

It will target the markets for transit services, public circuits and handle VSNL's international transmission requirements between gateway centres.

However, it has been unequivocally stated that "the international license would continue to be held and operated as a monopoly by VSNL, separate from the joint venture".

"The joint venture, therefore, will not affect in anyway the existing business of VSNL which will continue to be handled by VSNL exclusively," says the draft letter.

Laying down the criteria for selecting the alliance partner, VSNL has asked the aspiring alliance partners to elaborate their strategic vision, role in the joint venture, technological worth and market assessment. It has also sought financial details of the aspirant companies.

In the questionnaire, attached with the project outline, VSNL has asked the aspiring alliance partners to present their vision and goals for "at least 15-20 years and envisage as to how VSNL will benefit from the alliance in pursuance of its goal to emerge as a regional leader."

It has further asked as to how the aspiring company proposes to orient itself in a scenario where DoT and VSNL have monopoly. The contestants are required to deliberate on the impact of the proposed alliance on basic and cellular operators in the private sector.

On the financial side, the letter queries about the annual turnover, growth of the aspiring company in the last five years, the present position of the company in Asia-Pacific and SAARC region and its plans for the region.

The contestants have been asked to state their expectations of equity holding in the JV, their commitment level of financing and willingness to participate if equity is restricted at 25 per cent only.

Besides, they have been asked to specify for how long the maximum quantum of financial commitment to the project will continue and the longevity of their commitment.

The companies are also required to suggest alternatives to the proposed direct holding of share and lay down criteria for cross holding of shares with VSNL and the feasibility of VSNL shares being asset based.

The aspirants will have to forward their propositions in a situation where the management of the company is predominantly Indian.

The aspirants are further required to state their global and regional market share, their assessment of the transit traffic likely to be exclusively handled by the hub, their work experience with partners in Asia-Pacific and willingness to share with VSNL the details of any other proposal they have mooted.

- Compiled from the Indian media

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