Djane, just for completeness:
Bummer, looks like G* will be frozen out of the Indian sub-continent. VSNL had to ask the Indian government to increase it ICO stake.
Jeff Vayda
(from India on line, ciol.com
The Indian Space Research Organisation (ISRO) and
the Indian Department of Space have contributed significantly to the
systems studies which led to the final choice of ICO's satellite
constellation.
(and from the Financial Press: financialexpress.com
NEW DELHI, May 3: Videsh Sanchar Nigam Ltd has
defended its decision to invest in the rights issue of global
satellite telephony project, ICO Global, even as analysts
express fear over VSNL's increasing exposure to the project.
With the recent turmoil being reported at Iridium, doubts are
being cast on the profitability of a satellite telephony venture.
VSNL has sought government approval to invest $67.50
million as rights in ICO Global. It has already pumped in
$150 million as equity in two stages and has by virtue of this,
become the second largest shareholder in the consortium of
telecom operators with a little over seven per cent stake.
VSNL chairman-cum-managing director Amitabh Kumar,
however, says "we want to retain our stake in the venture and
leverage on the strengths of being a major shareholder and
hence, our intention to invest a further $67.5 million. At the
same time, if we get a good price in the market for selling part
of this stake, we would do so. We are getting the shares at
$5 each andthe market price is $8. Hence, it looks like a
good investment decision. The board has approved it and we
are awaiting the government nod for the rights issue, which
closes for subscription on May 26."
"We would like to be involved with one global and one
regional satellite project as we feel that satellite telephony has
tremendous potential," said Kumar.
Analysts are a little sceptical of VSNL's additional investment
plan. They say that the project, funded by over 60
telecommunication companies from 51 countries comprising
10 operational satellites and two in-orbit spares in medium
earth orbit (MEO), has already been delayed by over one
year which has led to a cost overrun.
The ICO scrip, which was trading at $8, is expected to take
a dip to $5-6 post rights issue and hence, may further erode
the existing investments by VSNL in the venture, feel
analysts.
"The VSNL investment of $150 million at $10 per share in
1995 has seen a $30 million dip in value as the ICO scrip is
currently trading at about $8per share on the Nasdaq," said
an analyst.
According to financial analysts, the new rights issue at $5 will
push ICO share prices to $5-6 range in the near future. In
fact, earlier this month ICO share price touched a new low of
just over $6, they add.
So far for its investment in ICO, VSNL has been allocated a
satellite access node (SAN) of ICONET at Chattarpur in
Delhi, the exclusive distribution rights for India and
non-exclusive rights for certain neighbouring and Central
Asian countries.
Market analysts state that VSNL's only rationale for fresh
investment may have been prompted by the fear of dilution of
equity resulting in losing its representation on the ICO board.
They say that many investors, however, have held on to their
ICO board seat without having anywhere close to $150
million in the project. Further, with Iridium's chief executive
officer recently resigning after a shaky start by the company,
it has put a big question mark on the cost of
multi-satellite-based GMPCS.
One of theinitial investors in the ICO project, US-based
Comsat, which invested the same initial level as VSNL, has
already pulled out, say analysts.
"VSNL, instead of putting all its eggs in one basket, should
spread its risk," said another analyst. VSNL officials,
however, maintain that there is merit in the investment and
that they would urge the government to speed up clearances
for the investment considering that not much time is left for the
issue to close.
Copyright © 1999 Indian Express Newspapers (Bombay)
Ltd.
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