VSNL spreads wings outside India

With an end to the monopoly it enjoyed in the international long distance (ILD) segment, Videsh Sanchar Nigam Ltd (VSNL) has had to face a number of pressures in the fiscal 2002-03. A dip in tariff and interconnect rate (revenue sharing with BSNL declined from 1:1 to 1:5) has also impacted VSNL`s profitability.

In the changed scenario, after the government opened up ILD services to private players, VSNL has decided to focus on national long distance services and internet telephony. "We will also continue to globalise VSNL`s business through new international operations, "Ratan Tata, chairman, VSNL said at the company`s annual general meeting held in Mumbai today.

To prevent duplication of the valuable infrastructure created by VSNL, the company has approached the government to offer its infrastructure to BSNL and MTNL at reasonable commercial rates on a continued basis. VSNL also plans to outsource from BSNL and MTNL their infrastructure (national long distances) for its captive uses. If these proposals are accepted, VSNL will be major benefactor, as it will be able to use its resources for alternate purposes.

VSNL`s national long distance services (the 3,500 km Delhi-Mumbai-Hyderbad-Bangalore) became operational from March 2003.

The company is currently expanding the backbone network on the Amritsar-Delhi and Mysore-Mangalore-Ernakulam routes, which is expected to be completed by December 2003.

Dramatic increase in grey market ILD services is due to the access deficit charge of Rs 5 per minute imposed by the government. Illegitimate operators take away around Rs 500 crore of turnover from licensed providers, and deprive the government of income since license fees are turnover based.

Gains from the sale of dermeger surplus land will be distributed to shareholders, and those who have sold their shares to Tata group (open offer)at the time of VSNL privatisation will also be eligible.

VSNL has offered voluntary retirement scheme to 953 employees at a cost of Rs 94 crore. The company has accounted Rs 39 crore VRS cost in the first quarter of the fiscal 2003-04, and the balance Rs 55 crore will be accounted in the second quarter of the current fiscal. The annualised saving on account of VRS will be Rs 40 crore.

Government of India has initiated talks with Tata group for divesting its remaining stake, or part of it, in VSNL, Tata revealed, while answering the questions raised by shareholders.

Presently the government of India holds 26.5 per cent stake in the company, while Tata group of companies hold 46 per cent equity stake.

The capital expenditure for the current year is around Rs 1,200 crore, of which Rs 200 crore is toward bandwidth, Rs 245 crore for national long distance, Rs 600 crore for undersea cable capacity, Rs 205 for investment in Tata Teleservices and the remaining, Rs 36 crore for voice circuits.

VSNL is looking to integrate all telecom services under the Tata Indicom brand.

The company, at present, is in discussions with the government to review compensation package promised by the government for early termination of its exclusivity.

Source: IRIS