VSNL profit dips, cuts stake in Tata Tele

MUMBAI: Videsh Sanchar Nigam Ltd. (VSNL) has announced its decision to invest a reduced Rs 8.36 billion for a 19.9 percent stake in fixed-line company, Tata Teleservices. This is in accordance with the board committee’s recommendations. Earlier, VSNL was to invest a sum of Rs 12 billion for a 26 percent stake.

The investment is to be made over seven years, with Rs 6.37 billion to be invested in the first four years. Tata Teleservices is a fully owned unit of the salt-to-software Tata group, India's second-largest conglomerate by sales. The group has a 45-percent stake in VSNL.

The decision by VSNL's board on May 28 to invest in the unlisted company raised a furore, with telecom minister Pramod Mahajan accusing the Tata group of attempting to use the overseas call carrier's cash to boost a weak affiliate.

The Tata group denied the allegations, saying that the investment would give VSNL access to the Hyderabad-based fixed-line operator's customer base. Tata Teleservices runs a fixed-line phone service in the southern state of Andhra Pradesh and has licences to operate in five more states.

VSNL’s Profit After Tax (PAT) dipped 33 percent, touching Rs 245.9 crore in Q2 of 2002 from Rs 368.5 crore in the corresponding period last year. PAT for half year, 2002 stood at Rs 507.1 crore as compared to Rs 734 crore in H1 of 2001.

Operating income decreased 21 percent y-o-y, as it posted Rs 1,247.8 crore in Q2 of 2002 from Rs 1,595.4 crore in the corresponding period last year. Profit before tax for the quarter ended September 2002 at Rs 378.4 crore as compared to Rs 534.2 crore for the corresponding quarter in the previous year, representing a dip of 29 percent.

The decrease in profitability is attributed to lower margins and other lower incomes.

VSNL, Managing Director, SK Gupta, said, "The next quarter would see significant investment in infrastructure, in the areas of both, voice and data as we seek to consolidate our strengths and take our business to greater heights with an increased customer friendly focus. While NLD would most certainly become an important revenue stream for us, the business will also help reduce our dependence on ILD."

Speaking about concerns expressed in some quarters regarding collect ability of receivables from WorldCom, Gupta added, "We have been receiving payments from our international carriers, including WorldCom on a regular basis and no irregularities with regard to their compliance to the existing payment cycles have been observed."

In view of the increasing demand for Value Added Services (VAS), VSNL would largely focus on tapping the latent demand for Value Added Services in the marketplace. "With this objective in mind, VSNL has in the last few months, set up a strong sales force to proactively generate business and service clients. Speaking on the same," said, VSNL, Director - Operations, N Srinath.

Pending final agreements with major domestic telecom operators for revenue sharing / interconnect for ILD voice telecommunication service, the same have been accounted for based on the same ratio of the revenue sharing for the year ended March 2002 and as adopted for the previous quarter ending June 30, 2002.

© Reuters

( With additional inputs from CNS)