VSNL will enter domestic long distance telephony market

The draft of the new telecom policy had initially proposed reviewing VSNL’s monopoly over international long-distance telephony by 2002. This was later changed back to 2004, at the time of the GDR issue. What are the chances of VSNL losing its monopoly before 2004?

The date now stands at 2004 and I don’t foresee any change. The GDR issue was done on this commitment. A new government at the Centre won’t change things three governments have changed after India agreed to open up international telephony to competition in 2004, and all of them have honoured it. The year 2004 is also in line with theWorld Trade Organisation (WTO) commitment.

Telephony accounts for Rs 1,600 crore of VSNL’s business. Leased lines, internet and other services account for another Rs 350 crore. This is only 23 per cent. By 2005, I see both telephony, internet and value-added services contributing almost equally to the net revenue. In 2004, when the services are opened up, we will lose some market. But by then the teledensity would have increased from 17 million lines to 150 million lines. Each line brings us 100 minutes of traffic. So as the lines grow, our traffic will also grow. Though we will lose in terms of market share, in value terms our revenue will go up.

We will also enter the domestic long distance telephony market. But only with a partner. Long distance telephony comes naturally to us. International and domestic are only artificial barriers.

We will start offering E-commerce services soon — both business-to-business and business-to-consumer. In terms of revenue, this may not be very high but as part of internet it has tremendous scope for growth.

Right now, no quality standards have been specified for internet telephony. Besides, most of the internet connections today are in big cities with big corporations. These are the people who will benefit if internet telephony is permitted. In three years, as long distance rates come down, the difference between the two will decrease. Even ordinary telephony will become economical. VSNL is already prepared for internettelephony. We have tested the technology…we can start services.

The basic thrust of the telecom policy is to increase the number of telephone lines. This has to be encouraged. The policy is necessary for privatisation (of basic telecom services) to take off — it has come to a standstill. There are no bidders for some circles.

The growth may not be so high. Our revenues will come from providing bandwidth. The Department of Telecommunications (DoT) has issued around 70 ISP licences. Each player needs at least 10 Mbps bandwidth. Even if 50 come to us, bandwidth requirement would be 500 Mbps by the year end. Already there is 100 Mbps bandwidth demand. We are expecting Rs 300 crore to Rs 500 crore from leasing bandwidth, dial-up internet access and leased lines. Once the broadcast policy is out,revenues from this segment will go up. VSNL is broadcasting 10 channels as of now. GMPCS will also take off in 2000-2001. VSNL has taken stakes in Iridium and ICO Global.

For new subscribers VSNL spends on the start-up kit (contains CD-ROM with software like auto-dialer, Internet Explorer 4.0, internet guide with FAQs). They also need help on installation, how to use the software…for renewals, we save that much of money. We are just passing this benefit on to the subscriber.

These issues come under the Telecom Regulatory Authority of India (TRAI). VSNL has a monitoring system whichalerts us if anything goes wrong with any of the links. We have set up a subsidiary — VSNL Seamless Services Limited — to handle ISP services. The licence has been obtained. In four months, internet services will be fully handled by the subsidiary.

The VSNL board has categorically ruled out any cross-holding. A five per cent holding is more like a portfolio investment. Unless the stake is 15 per cent or so there is no scope for synergy. We have no problem with buyback. Disinvestment is good for VSNL.