For VSNL, year 2001-02 was its last year of operation as a government
monopoly, before getting integrated into Tata’s fold in April this year. The
company handled 3.1 billion minutes of international telephony traffic during
the past fiscal, exhibiting a growth of 16 percent. Despite this increase in the
volume traffic, VSNL’s income from operations dwindled by 10.8 percent–to Rs
6,508.1 crore from Rs 7,297.5 crore in 2000-01. This was mainly due to a
significant reduction in settlement rates and tariffs of IPLC and Internet
services. The net profit was down by 21 percent to Rs 1,407.4 crore.
VSNL’s income from international telephony services, as on 31 March 2002,
was at Rs 5,734.2 crore as compared to Rs 6,386.8 crore in the previous fiscal.
Income from other services, which include Internet and leased lines, accounted
for Rs 773.9 crore. VSNL continued to be a dominant ISP and witnessed a growth
of 11 percent in the subscriber base from 5.29 lakh to 5.87 lakh on 31 March,
In FY 2001-02, the company created a record of sorts by paying an interim
dividend of Rs 1,132.3 crore to the government.
It thus became the first PSU in the history of corporate world to pay an
interim dividend of 750 percent.
VSNL participated in the 36-member consortium formed for construction and
commissioning of submarine optical fiber cable systems, styled SAT-3/WASC/SAFE
cable system. This connects Europe with Africa and Asia, spanning across 15
countries. VSNL has invested substantially in the total project cost of about
$650 million. This cable system was formally inaugurated in May this year.
While the past fiscal has been an interesting period for the company, the
current fiscal promises to be full of challenges. The biggest development has
been its privatization, with Tatas obtaining a 25 percent stake in VSNL.
Integration of this behemoth into the Tata Group’s telecom ventures is going
to be a daunting task. Recently, VSNL board’s decision to invest up to Rs
1,200 crore in Tata Teleservices ruffled the feathers of echelons in the
government. With its monopoly terminated in the international long-distance (ILD)
telephony space, VSNL needs to get into the national long-distance arena to
build a customer base of its own. As of now, 87 percent of the company’s
business accrues from ILD, a business which will soon see multiple operators.
While the decision to invest in Tata Teleservices was largely in its own
interest to get a captive customer base, government’s wrath has thrown a
spanner into VSNL’s plans. Building a national network from scratch would cost
the company anywhere between Rs 8,000-10,000 crore over 5-6 years. This option
is not a viable one for VSNL, as the existing players in the basic telephony
field are already busy building their networks and would leave the company
lagging miles behind. The decision to acquire a 26 percent stake in Tata
Teleservices, and thus have access to its customer base, has now been put on
hold. Any delay on this front could cost dearly for VSNL.
The company has also decided to invest heavily in VoIP, taking into account
the fact that VoIP could eat into its ILD services.