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Telecom Services V&D 100

Top10 Vendors: 5 - VSNL: Value Creator

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Voice&Data Bureau
New Update

The Tata-run VSNL created a significant landmark when it
announced financial results for the last fiscal-an astounding growth of 85%,
to touch Rs 8,857 crore.

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VSNL's transformation has helped it lead in segments such as
wholesale voice, wholesale and enterprise data, and retail broadband; and
ensured global infrastructure and global customers. This is a strategic shift as
VSNL, when the government was its main promoter, had monopoly in the Indian ILD
market in 2002, contributing 89% to the total revenue.

5 - VSNL

Global trends such as Web 2.0 and Peer2Peer multimedia,
globalization, increased outsourcing to India, and consolidation across segments
and geographies are in its favor.

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VSNL was active last year in the bandwidth market, reducing
prices for its international bandwidth products-International Private Leased
Circuits and Internet Leased Lines by 25-40%.

On the retail side of the broadband market, its announcement on
Wi-Fi expansion was hailed by the industry. VSNL has drawn up plans to increase
the Wi-Fi hotspots to over 1,000 from the present 250. Its hotspots include the
major domestic and international airports, star hotels, educational
institutions, sports stadium, hospitals, restaurants, etc.

Area of operation:

ILD,
NLD, ISP, Content Services

Address: Lokmanya Videsh Sanchar
Bhawan, Kashinath Dhuru Marg, Opp: Kirti College, Prabhadevi, Mumbai 110
028

Tel: 022 66578765

Fax: 022 66591912

Website: www.vsnl.co.in 

Highlights

  • Announced Wi-fi
    expansion, targetting 1000 Wi-Fi hotspots in FY '07-08

  • Leader in wholesale
    International Voice

  • Launched Enterprise
    grade messaging service for SMEs

  • Connected North America,
    Europe and Asia through global Ethernet service
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VSNL, the number one wholesale international voice player with
annual volume of 20 bn minutes, is also planning to tap into the international
business travelers' segment by offering roaming wireless broadband service to
high-value travelers during their stay in India. The services allowed seamless
roaming and usage within the VSNL wireless broadband network in India, wherein
visitors can access high speed wireless broadband using their home country
account and identity.

During FY '06-07, VSNL also launched ready-access business
messaging and collaboration services in alliance with Microsoft it is service
targeted at the SME market and provides secure, enterprise grade messaging
capabilities with quick and easy deployment on a pay per use basis without the
need for high up-front capital investment.

On the international front too, VSNL's performance was
exemplary, and several initiatives would vouch for this. VSNL Singapore, the
overseas arm of VSNL, introduced dedicated global Ethernet, private line service
connecting major cities throughout North America, Europe, and Asia. Following
the acquisition of 26% stake in Neotel of South Africa, services were launched
in August 2006, and the investment is expected to give anchor for VSNL's
footprint in other African countries.

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'We
will definitely go for acquisitions'

What are your strategic plans for FY
'07-08?



On the global voice side, we would like to have an increased focus on the
mobile operator segment with new product innovation and carrier
inter-connects. Leveraging wholesale VoIP leadership is on the cards, and
we want to be a transport provider for companies such as Google and
Yahoo!. We are also planning entry into the retail voice segment by
launching international calling and content offerings.

N
Srinath
MD
and CEO

As far as data is concerned,
we are implementing two submarine cables-Intra-Asia (Singapore-Hong
Kong-Japan) and India-Europe (via the Middle East). We will continue to
launch managed services offerings. For the purpose, we will expand eight
data centers in places such as Mumbai, Chennai, Delhi, Bangalore, Pune,
and Hyderabad to support hosted services. Focus on Indian mid-market
enterprises supported by WiMax rollout is on the cards. We will leverage
global Ethernet leadership and MPLS VPN to expand services to
India-enabled enterprises. VSNL will also be exploring global outsourcing
projects, and is working with TCS for bundled network management and
infotech projects.

Retail broadband will see a lot of
action in the coming months. What are your plans?

During the current fiscal, VSNL will be implementing WiMax network in five
cities such as Mumbai, Bangalore, and Delhi in phase 1, and will continue
targeted wireline rollout. We are also targeting around 1,000 Wi-Fi
hotspots by March 2008. The other focus area would be innovation in
content, and applications addressing new customer segments. However, we
have a major challenge because of last mile issues.

VSNL has been in the news for the
IPTV launch. What's happening in this front?

IPTV is in the testing stage at present, and we may face last mile issues.
We need to wait till we get a clear idea about last mile. As per our
present plan, IPTV content may be co-offered, and services may include
video-on-demand, value-added applications etc.

VSNL is one of the few Indian telecom
companies with global presence. What are your plans for investment?

We are planning to spend around $500 mn in FY '07-08. Major projects
include expansion of Internet data center; WiMax rollout to 120 towns/400
cities by March 2008 for enterprises and five towns/1,300 cities for
retail segment; the ongoing Intra-Asia and India-Europe cable projects and
investment in Neotel, South Africa; and network capacity expansion in
India backbone, TGN-Pacific and SMW-4.

Are any fresh acquisitions on the
cards?

We are always looking at acquisitions. If the target companies can
supplement our growth, we will definitely go for acquisitions.

What are your major challenges?

If I look at the overall market, retail is still challenging as last mile
issues are posing major threats to telecom operators in India.

In the retail business, we do not have
scale. Availability of cost effective equipments will be the key to
success. Prices may fall in the retail segment. Voice business is stable
and creating cash for our operation costs. We feel that IP transit will
also be profitable.

VSNL is hoping to be number one or two the number one or two in
each of its focus markets. We are also looking at 15% CAGR organic sales growth,
having at least 20% EBITDA margin.

Besides offering a strong platform for VSNL to become
competitive in the global carrier and enterprise solutions market, VSNL's
acquisitions have given assets and continued revenues. However, the big question
here is-can they sustain in the long-term, especially when they play in the
highly price sensitive wholesale market?