VSNL packs $200 m kitty in its South African safari
The Financial Express — June 13, 2005

Videsh Sanchar Nigam Ltd (VSNL) said it will spend $200 million to start services in South Africa, having bought a stake in a fixed-line operator there in February. The company plans to start its South Africa operations in the first quarter, chairman Subodh Bhargava said in an interview. He didn't give details about services to be offered.

Mumbai-based VSNL, which faced competition as an overseas call operator in April 2002, is trying to boost sales by venturing outside India as long-distance call rates fall and rivals such as Reliance Infocomm Ltd and Bharti Tele-Ventures Ltd offer customers more incentives. In April, VSNL bought a stake in US-based Tyco International Ltd.'s global undersea cable network to bolster overseas services.

"The company is positioning itself as a global solutions provider for voice and data communications with the Tyco acquisition and the South Africa purchase," said Suhas Naik, who helps manage the equivalent of $343 million at ING Investment Management, including Videsh Sanchar shares. "Success will depend on how well it executes the plan." South Africa on February 12 gave Videsh Sanchar a 26% stake in a planned second fixed-line telephone service operator, ending the monopoly of Telkom South Africa Ltd.

Telkom, Africa's biggest fixed-line operator, needs competition because the nation's communication costs are high, South African President Thabo Mbeki said on February 11. South African Communications Minister Ivy Matsepe-Casaburri said on February 18 Videsh Sanchar didn't have to pay for its 26% stake. Videsh Sanchar received the stake in exchange for bringing knowledge and technology into South Africa and for committing to invest in the country, Matsepe-Casaburri said.

The Indian government sold a 25% stake in VSNL in February 2002 to the Tata Group for $330 million, bringing its stake down to 26%. The Tata group later bought an additional 20% in VSNL from the market. Videsh Sanchar, which got approval for its $130 million acquisition of Tyco's global undersea cable network, expects the purchase to boost second-half sales.