Tata Comm readies $2bn capex

Tata Communications, a global voice and data telecom provider with annual revenues of $2 billion, has identified ‘20 top emerging markets’ that will drive its next phase of growth. The firm earns two-third of its revenues from overseas businesses. In the last six years, it invested about $1 billion to fund acquisitions (Tele Globe, a stake in Tata Teleservices) and setting up of new submarine cable.

The growth strategy going forward revolves around regions where global multinational companies are setting up operations. That includes countries in Latin America, Africa and South East Asia and Central and Eastern Europe. VSNL will set up infrastructure that will support various telecom enterprise solutions, including tele-presence, manage data services, messaging etc.

Between 2009 and 2011, the company has charted a 12-15% compounded annual growth rate. This means, it will double its revenues to $4 billion and ebitda will grow 20% to about $800 million by 2011-12.Tata Communications, meanwhile, is also investing in a major way in India. It has earmarked a $2 billion capex over three years, its most ambitious plan in its history.For setting up fresh capacities in submarine cable undersea, the company will spend $500 million, Wimax for broadband connectivity for a captive market of 30 million potential subscribers will entail an expenditure of $500 million. Another billion dollars will go for setting up data centres and expansion of its fibre network.

Read more in The DNA Money article.

Govt to divest residual 26.12% stake in VSNL

The government is planning to divest its residual 26.12 per cent equity in the Tata-owned Videsh Sanchar Nigam Ltd (VSNL), now called Tata Communications.

It is unlikely, however, that the government will decide to sell its entire residual stake in the stock market before it resolves the issue of the surplus land of around 773 acres that was kept outside the disinvestment process.

The government owns nearly 53 per cent of the land bank and does not want to be reduced to a minority shareholder in VSNL since this would lower its control and realisation from the eventual sale of the land.

VSNL was a listed company when the government disinvested 25 per cent of its paid-up equity capital through a strategic sale in February 2002 to the Tata group. This reduced the government's stake to 27.97 per cent, of which 1.85 per cent was sold to VSNL employees. According to the shareholding agreement, the Tatas could exercise a "call" option for the government's residual shareholding, except one "golden" share, anytime between February 13, 2006, and February 12, 2007, at a fair value of the called shares. However, the Tatas did not exercise the option.

The golden share allows the government to appoint one non-retiring director on the Board, and grants it affirmative voting rights on the sale of the land or any change in its use.

Read more in The Busines Standard article.

Tata Communications to raise $1bn

Tata Communications, the country’s largest, long-distance telephony company, plans to raise $1 billion (Rs 4,000 crore) to partly fund its expansion plans for the next three years. It has already approached banks to raise $350 million within a month.

In February, the company, formerly known as Videsh Sanchar Nigam (VSNL), said that it would spend $2 billion in the next three years to complete additional submarine cable systems connecting emerging markets across the world and for its WiMax services.

Bank of America is one of the banks working out the mandate for raising $350 million for the first year of the three-year expansion plan.The company has options such as foreign currency convertible bonds, qualified institutional placement or dilution of stake in one of its subsidiaries.

Read more in The Business Standard article.

Govt to study call option validity for PSUs

The Cabinet Committee on Economic Affairs (CCEA) will take up tomorrow the issue of ‘survivability’ of the call-option provision of shareholders’ agreement entered into at the time of strategic sale of central public sector undertakings during 2000-03.

A call option gives the buyer the right, but not the obligation, to buy a specific futures contract at a pre-determined price within a limited period of time, in accordance with a shareholder agreement. The span of time for which the option is valid can be referred to as the ‘survivability’ period.

State-owned firms like Videsh Sanchar Nigam Ltd (VSNL), Paradip Phosphates Ltd (PPL), and Jessop and Company were divested between 2000 and 2003. The matter was referred to a group of ministers after the Department of Disinvestment sought legal opinion on the issue.

The Centre at present owns a 26.1 per cent stake in VSNL, 26 per cent in PPL, and 27 per cent in Jessop & Co Ltd.

The issue came into prominence after Sterlite Industries, which bought 51 per cent of Balco, wanted to exercise its call option under the shareholders’ agreement and tried to buy the residual 49 per cent stake.