Exhibit (a)(1)
ARUN GUPTA
EXECUTIVE DIRECTOR (FINANCE) [VIDESH SANCHAR NIGAM LIMITED LETTERHEAD]
March 28, 2002
To the holders of Equity Shares and
American Depositary Shares ("ADSs"), each representing two Equity
Shares, of Videsh Sanchar Nigam Limited ("VSNL"):
On March 28, 2002, Panatone Finvest Limited ("Panatone") and its shareholders
are mailing to shareholders of VSNL a Letter of Offer, dated as of March 27,
2002 (the "Letter of Offer"), pursuant to which Panatone and its shareholders
will make an offer to purchase for cash the equity shares of VSNL, par value Rs.
10 per share (the "Equity Shares"). Panatone is required to offer to purchase
(the "Offer") up to 57,000,000 Equity Shares (including the Equity Shares
underlying the ADSs), representing 20% of the total paid-up and voting equity
share capital of VSNL, at a purchase price of Rs. 202 per Equity Share.
THE BOARD OF DIRECTORS OF VSNL (THE "BOARD") HAS DETERMINED TO EXPRESS NO
OPINION AND TO REMAIN NEUTRAL WITH RESPECT TO THE OFFER. This decision by the
Board was made in the absence of the members of the Board appointed by Panatone
and its shareholders, each of whom did not vote because they are deemed
interested directors. The Board believes that making a recommendation supporting
the Offer would be tantamount to recommending that VSNL's shareholders (for
purposes of this letter, such holders being the holders of the Equity Shares and
the holders of the ADSs) sell their holdings in VSNL. The Board is concerned
that this might be construed as a negative statement regarding the fundamentals
of and outlook for VSNL, which could be misleading in light of the fact that the
Board has neither made any analysis nor sought any analysis from an independent
expert regarding the fairness of the Offer at the given price.
The Offer is being made pursuant to the provisions of Regulations 10 and 12 of
the Securities and Exchange Board of India, which, when triggered, require a
purchaser that has made a substantial acquisition of the shares of a company
(defined under the laws of India to mean 15% or more but less than 75% of the
outstanding shares or voting rights in such company) to make a mandatory tender
offer for a minimum of 20% of the outstanding shares of such company. The
Government of India (the "GOI") has already sold 25% of the Equity Shares to
Panatone as part of its privatization program. As such, Panatone is compelled to
make the Offer and the Board sees no reason to make a recommendation opposing or
supporting the Offer.
The Share Purchase Agreement, dated February 6, 2002, among Panatone, Panatone's
shareholders, the GOI and VSNL, and the Shareholders' Agreement, dated February
13, 2002 (the "Shareholders' Agreement"), among the GOI, Panatone and Panatone's
shareholders, were entered into in connection with the sale of 25% of the Equity
Shares by the GOI to Panatone. Pursuant to the Shareholders' Agreement, the
number of members on the Board that the GOI has a right to name decreases (and,
concomitantly, the number of Board members that Panatone and its shareholders
have a right to name increases) as Panatone and its shareholders increase their
holdings in VSNL. As stated in the Shareholders' Agreement, should Panatone and
its shareholders own: (1) more than 25% but less than 30% of the Equity Shares,
Panatone and its shareholders have a right to name up to seven members to the
Board and the GOI has a right to name up to five members to the Board; and (2)
more than 30% of the Equity Shares, Panatone and its shareholders have a right
to name up to eight members to the Board and the GOI has a right to name up to
four members to the Board. VSNL is now controlled by Panatone and Panatone's
shareholders and the GOI currently has a right to name up to six directors to
the 12-person Board. As such, an actual or potential conflict of interest may
exist between (i) VSNL and (ii) Panatone and Panatone's directors or affiliates.
In view of the above, the Board believes its most prudent course of action
regarding the Offer is to remain neutral and permit VSNL's shareholders to make
their own decision regarding whether or not to participate in the Offer.
Shareholders of VSNL are urged to carefully review all of the information
contained in or incorporated by reference in the following documents filed by
Panatone and/or Panatone's shareholders: (1) the Letter of Offer; (2) the
Schedule 13D, filed on February 15, 2002, as amended on March 15, 2002; and (3)
the Schedule TO, which is expected to be filed on March 28, 2002, as well as any
other materials related to the Offer that they may file, and VSNL's publicly
available annual reports on Form 20-F and reports on Form 6-K, which are
available at the United States Securities and Exchange Commission's (the "SEC")
web site at WWW.SEC.GOV.
VSNL intends to file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 setting forth the Board's decision to take no position with
respect to the Offer as well as certain other information about VSNL, its
officers and directors and the Offer. The Schedule 14D-9 will also be available
at the SEC's web site listed above. You should review this information carefully
before making any decision with respect to the Offer.
Very truly yours,
/s/ Arun Gupta
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Name: Arun Gupta
Title: Executive Director (Finance)