Another telecom shakedown?

Reliance blitzkrieg

The market grapevine is comparing the launch of Reliance Telecom to the group8217;s aggressive prestige campaign to market the G-series debentures nearly 17 years ago when the company was beset by financial and political problems. Since that tremendous marketing effort, most of Reliance8217;s fund raising efforts mostly overseas have been a breeze. But again, the sceptics point out that Reliance has changed a lot in the intervening 17 years. It has scaled down its textile business and has very little direct interaction with consumers.

Secondly, it has only made two IPOs since then and has had very little direct contact with retail investors too. With Reliance Telecom, the group has to combine several skills. It has to deal with consumers who are already satiated with a flood of new technology, fancy gizmos and continuously falling prices and lure them with a better offer.

Secondly, its telecom offering is structured in such a way that people have to buy both the instrument and the service, so it has to convince personal finance companies to carry a risk by offering quick, easy loans to subscribers.

And thirdly, it is up against aggressive and entrenched competitors such as Bharati Telecom and the massive former monopoly MTNL. Will Reliance pull off a spectacular coup again? The new year will pronounce the verdict.

Disinvestment-go-around

Ideas have a way of going around, getting dumped and being resurrected every few years. The Disinvestment Fund, proposed by the Disinvestment Ministry, was originally proposed by the Disinvestment Commission DC five years ago. The commission had urged the government not to use divestment proceeds to meet the Budget deficit, but to earmark the money for restructuring PSUs and offering voluntary retirement schemes. Similarly, the Asset Management Company to handle the disinvestment, which was recently proposed by Vijay Kelkar and allegedly shot down by government, was proposed by Kelkar himself in his earlier avatar as Finance Secretary.

It had then triggered off a national debate, when DC chairman G. V. Ramakrishna punched a few holes in the plan and suggested a safer alternative in the form of the National Shareholding Trust NST. The NST concept is incidentally, working very well in Singapore, and is worth a trying out with a few companies at least. It is curious that Kelkar chose to resurrect his AMC idea rather than the NST, which he had then acknowledged as a better option.

The NST8217;s two-stage divestment process would help companies enhance their value, by immediately moving them out of the public sector and will help government to raise quick funds without resorting to dividend stripping, cross-holding and other gimmicks. The only safeguard that the NST needs for its success is an independent board of directors and a managing trustee of known integrity.

ONGC8217;s race?

The revival of the disinvestment programme may be a lifesaver for ONGC. The oil exploration giant that was to be stripped of Rs 6,000 crore plus as special dividend to meet the shortfall in the disinvestment target has won a reprieve. Better still, informed sources say that the government may listen to ONGC8217;s valid pleas and allow it to bid for one of the two oil companies8212;HPCL and BPCL. In that case, the 8216;divestment8217; in the oil sector will again be a case of one PSU acquiring another and both remaining under Petroleum Minister Ram Naik8217;s benevolent care.

While that may not be the best solution, ONGC has to be allowed to gear up for competition from Reliance through forward integration into refining. Moreover, it is a better option than extorting a large chunk of its reserves as special dividend.

E-mail Sucheta Dalal