On 2 November, 2001, VSNL filed an application with DoT for the grant of
national long distance (NLD) license. Sources say that VSNL is in a hurry to
start the NLD service at the earliest (by the end of this fiscal or in the first
quarter of 2002). The company is reportedly busy tying all loose ends in
providing connectivity to all major cities by tying up with bandwidth providers
for a faster rollout of services.
Recently, VSNL tied up with Reliance Infocom for leasing of optical fiber
cables to provide connectivity to main cities. The company may also lease some
bandwidth from Gas Authority of India Limited (GAIL), Indian Railways, and Power
Grid Corporation of India Limited (PGCIL) if needed. With Bharti Telesonic
already starting the NLD service for carriers, one should not be surprised to
see an early launch of VSNL’s NLD plans.
VSNL’s entry in NLD will help it fetch a good valuation when the government
disinvests 25 percent of its equity. Earlier, the valuation of the company got a
beating with the government accepting the international long distance (ILD)
recommendations of TRAI, which fixed the entry fee at Rs 25 crore and a
performance bank guranteee of Rs 25 crore for operating ILD services in the
country. The valuation was further affected with ILD operators being allowed to
provide voice-based services using VoIP technology from 1 April, 2002. Now, with
an NLD license, VSNL can significantly make up for the loss.
More Revenues
At present, an international call from India to the US, during off-peak
hours, costs Rs 42 per minute. BSNL gets around Rs 20 for taking the call to the
VSNL gateway, VSNL gets Rs 6 for acting as an intermediary between BSNL and the
international carrier, and the international carrier gets Rs 16 for carrying the
call in the respective country and than terminating it at the called party’s
end. With VSNL acting as the NLD operator, the revenue of Rs 20 for taking the
call to the VSNL gateway will remain with VSNL and this can give a boost to the
company’s revenues in the coming fiscal as VSNL has the monopoly in ILD till
31 March 2002.
Nimble Giant |
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As on 31 March 2001, VSNL was sitting on a huge cash reaserve of Rs 4,647.28
crore. To this, it added Rs 734 crore in the first half of the current fiscal.
In July 2001, the company announced a special dividend of 500 percent involving
a payout of Rs 1,425 crore. Recently too, the government declared a 750 percent
special interim dividend, which depleted the cash reserve by Rs 2,366 crore. But
in spite of these hefty dividends, VSNL is left with a cash reserve of around Rs
1,500 crore. It plans to pump around Rs 1,200 crore over the next three years in
NLD through internal accruals, which will help the company to move into vertical
integration mode as it will carry the long-distance traffic of its own without
passing it to somebody else. It will also help in reducing overheads by using
its current resources for NLD operation.
Being a NLD operator, VSNL also has the advantage of not paying the license
fee of Rs 100 crore and a performance bank guarantee of Rs 400 crore, which is
to be repaid in four phases, in a time frame of five-seven years. This was a
compensation given to VSNL for terminating its monopoly on 1 April, 2002 instead
of 1 April, 2004. So whichever company (read Tata or Reliance) takes a 25
percent equity stake in VSNL will also benefit by getting the NLD license for
free.