According to informed sources, VSNL and MTNL are planning to list on the New York Stock Exchange in the first week of May.
VSNL (FY99 Income Rs 71.76 bn) is India's monopoly provider of international telephony services. It also provides telex and telegraph services as well as value-added services such as leased lines, e-mail, Internet and video conferencing.
MTNL (FY99 Revenues: Rs 52.47 bn), a public sector company, is a franchisee of the Department of Telecom. The company has a 15-year telecom license to operate in New Delhi and Mumbai until the year 2013.
In view of the recent announcement by the government to permit acquisitions upto 10 times export earnings for knowledge based industries, the recent decision shall facilitate easier access to funds.
It shall thus fund the expansion plans of the telecom majors who have been scouting for greener pastures abroad, in view of fierce competition being witnessed in India, because of the liberalisation of the economy allowing for the entry of private operators.
The money raised could be used in beefing up technology and infrastructure to compete effectively with the newly set up networks of private sector telecom companies. Then there is the expected surge in marketing costs as competition gets fiercer. Till now these companies were monopolies in their markets and therefore the need for such expenditure did not arise.
A listing on the NYSE would give the two telecom companies access to the largest capital markets in the world. Thus future funding needs could be met at shorter notices and at competitive costs or pricing. Investors too would benefit as the two companies would then have to necessarily comply with US GAAP.
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