Rank 2: Videsh Sanchar Nigam Ltd: Gritful Stances

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,

2002.

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.

Videsh Sanchar Nigam Ltd TURNOVER FACTSHEET CEO : SK Gupta  Area of Operation : International long distance service provider and Internet service provider Address : idesh Sanchar Bhavan, MG Road Fort, Mumbai 400 001 Tel : 022-2624020 Fax : 022-2624466 Web Site : www.vsnl.com S W O T Strength  Formidable infrastructure and now a part of Tata Group Weakness Absence of a captive customer base  Opportunity NLD, VoIP Threat  Govt interference and delay in rolling out NLD services could erode bottomline

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.