TATA Group company Videsh Sanchar Nigam Ltd (VSNL), one of the largest international long distance (ILD) service providers, has filed a suit against the Government of India (GoI) in the Bombay High Court seeking a compensation of Rs 2,560.72 crore for premature termination of its ILD monopoly.In the petition filed on Thursday, VSNL claims that the government has failed to keep its commitment about VSNL being allowed to retain its monopoly in ILD telephony market till March 31, 2004. The Department of Telecommunications (DoT) through a letter dated July 28, 2000, had terminated VSNL’s monopoly in voice telephony by 2002, two years ahead of the promised date, the petition said.DoT on behalf of GoI had offered a compensation package to VSNL for early termination of monopoly and had admitted that premature termination of monopoly would cause severe prejudice and monetary loss to the company. DoT had also offered additional compensation in case loss in revenues was proven by an inddependent consultant, the petition said.In September 2000, Credit Suisse First Boston (CSFB) and Salomon Smith Barney (SSB), who were the lead managers for VSNL’s Global Depository Receipts (GDRs) in 1997 and 1999, respectively, were entrusted mutually (by GoI and VSNL) to assess the losses. CSFB had estimated that the total losses of VSNL under earnings before income taxes depreciation and amortisation (EBITDA) were at Rs 3,759 crore while SSB estimated the cumulative economic losses to be at Rs 2,936.4 crore.SBI Capital, a subsidiary of SBI, in its report of this month assessed the compensation package at Rs 2,980 crore.VSNL cites that GoI is not responding to the compensation demands, despite repeated reminders to the authorities, even though DoT in a letter on March 22, 2001, had said ‘it is too early to assess the loss in profit in totality’. ‘‘This would be seen only after the competition steps in, and the justification for any additional compensation could be examined hereafter,’’ the DoT letter stated.On May 1, 2001, VSNL received a fax from DoT which once again stated, ‘the question of any additional compensation could be assessed only once the plaintiff starts operating services under the packages already offered.’’Later, on January 18, 2002 GoI had directed state-owned MTNL and BSNL to route their ILD calls for a period of two years through VSNL as the ‘most favored customer’ at ‘market rates’.However, the definitions of ‘most favoured customer’ and ‘market rates’ were not clearly put forth in the directive. Despite a number of communications to GoI, it failed to give any adequate response, following which VSNL issued a notice on November 25, 2004, to GoI calling upon it to pay the compensation.
