Name stake: Tatas to tag along VSNL

Videsh Sanchar Nigam Limited, India’s largest international long-distance telephony provider, is all set to undergo a brand makeover. Acquired by the Tata Group in 2002, VSNL will incorporate the Tata brand name by the first of half of this calendar year.

This means that it may have to first acquire the residual 26.12% government stake in VSNL before any changes can be made in the name. The Tatas have to take a final call on the buy out by the evening of February 12, the cut off date set by the government on the issue.

“The VSNL board is considering a proposal to attach the Tata name to VSNL. We are, however, not yet clear as to which form it would be in,” a top Tata source, told ET. “If it happens, VSNL will have to make royalty payments to the Tata Group to acquire branding. But that would be a very insignificant sum compared to the benefits and goodwill that will be generated by associating with brand Tata,” he added.

So, you may well see a completely new brand name or an assorted ‘Tata-VSNL’. Else it could just have a tag line of “a Tata Group Enterprise’. The Tata group companies which don’t enjoy the power of the Tata brand currently are SerWizSol (a third party voice and non-voice BPO company), Ginger Hotels (under Rs 1,000 per night hotel chain), Indian Hotels (Taj Group), Nelito (a provider of banking software solutions) and CMC (second largest domestic software provider) and Tayo Rolls (a steel rolls company).

Retail chains like Infiniti Retail, which runs Croma, a chain of multi-brand consumer electronics and durables; Trent, which runs Westside fashion stores, and Titan, the world’s sixth-largest manufacturer of watches, also go without the Tata branding. On the other hand, companies like Voltas and Rallis have ‘A Tata Group Enterprise’ inscribed under their logo.

Apart from work on the brand front, VSNL is readying itself for a new under sea cable project to connect Europe and India. Besides, it is also looking at acquisitions in the managed-services business. VSNL will expand significantly, which includes buying capacity in an east African under-sea cable system EASSy.

It is also in talks with many mobile operators (including Egypt’s Orascom) to jointly develop a $350 million India-Europe under-sea cable system. The cable may have landing stations at France and Italy. The company also plans some acquisitions in the managed services space (including security) over the next three years.

VSNL currently claims to be the largest ILD player in the world with a turnover of 20 billion minutes per year. “VSNL plans to retain the number one position and expand its market share in the broadband space. Currently, it owns only 10% market share in broadband. In other segments it aims to be number one or a strong number two,” these sources said.

The 4,000-people strong VSNL is expecting revenues of over Rs 9,000 crore this year. Typically, about 60% of the turnover comes from voice services. The rest come from data and broadband segments. Currently, the Tatas own a 45% stake in VSNL. About 40.61% is held by Panatone Finvest (a Tata-floated SPV). Tata Power holds 0.90% while Tata Sons hold 3.64%.The Tatas acquired about 25% in VSNL in February 2002 for Rs 1,439 crore.