The formal approval is still awaited. However, VSNL top brass are confident there will not be any hitch in getting a nationwide licence. The process of application will be similar to that of any ISP. "The restrictions will not hold good now because the services will be with a separate subsidiary," a senior VSNL official said.

DoT's change in stance comes nearly a year and a half after the report on hiving-off VSNL's value-added services into a separate subsidiary was submitted by PricewaterhouseCoopers (then Price Waterhouse). VSS was set up as a shell company over eight months ago but the board was in a quandry on whether or not to operationalise it.

DoT itselfis an ISP in the towns and cities were VSNL does not operate internet services. "These DoT nodes have also been set up by VSNL," officials point out. DoT's dithering has already given private ISPs like Satyam Infoway a headstart in cities like Ahmedabad and Coimbatore where there is high demand for quality internet services. Satyam Infoway has launched in 28 cities so far and attracted premium valuations on Nasdaq on the strength of being an internet access provider, apart from its portal services.

VSNL is now holding internal discussions on whether the subsidiary should be spun-off from the parent in which case VSNL shareholders would automatically hold a proportionate stake in VSS, or be carved into a separate entity 100 per owned by VSNL.

Another issue facing the company, is whether to appoint consultants to advice it on the matter, considering the PricewaterhouseCoopers report is now outdated. "Depending on how much of modification is needed we will decide whether to do it on our own or appoint anexternal agency," the official said. Once the subsidiary becomes operational it will be in direct competition with DoT in certain cities.

Regarding reports about the subsidiary going in for an ADR, the official said the decision would based strictly on funds requirement. Right now, VSNL is focussed on the more immediate issue of converting its GDRs to ADRs. Thirty per cent of the PSU is with GDR holders.

As the first step in this direction, 1998-99 accounts have been finalised as per US GAAP. "Most of the big telecom companies are listed on NYSE (New York Stock Exchange) but the IT companies are listed on Nasdaq. We are both a telecom company and in internet services - so we could list in either," the official said. The conversion is expected to happen before the end of fiscal.