New Delhi: Videsh Sanchar Nigam Limited (VSNL) Chairman and Managing Director Shailendra Kumar Gupta has said that the disinvestment of the state-run overseas telephone provider is likely to be completed within a year.

In an exclusive interview to UNI, Gupta said the government could go about disinvestment in two broad ways. "One could be through straight sell off to a strategic partner and the other could be in phases where the government equity would be brought down gradually from 49 percent and lower."

He said the whole process would take one year and the move might be notified after January 30 meeting of the Cabinet Committee on Disinvestment.

Sources in the disinvestment ministry confirmed that disinvestment of VSNL would be done in phases. In the first phase seven percent of the government equity would be offloaded in favor of employees and the public.

If seven percent equity is offloaded in the first phase, only 20 percent equity would be left for the strategic partner. This would not be an attractive proposition, as the buyer would like to hold at least 26 percent equity along with management control.

In order to increase the strategic partner's shareholding to at least 26 percent, the government can increase the paid-up capital or even authorized capital, sources said.

The government's stake of 53 percent in VSNL may come down further to 26 percent by dilution of its equity firstly through the open market route and then by resorting to a strategic sale.

Last year, the government had announced plans to end VSNL's monopoly on international calls and throw open the business private operators. The government is expected to cough up Rs. 7 billion to VSNL as compensation for ending the monopoly. The government's plan to reduce its stake to 26 percent before April 2002 is aimed at getting a better price for its holding in the firm.

But Gupta said the compensation package was too little and the government would have to include revenue sharing by international players.