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VSNL monopoly to end early -- Cabinet approves STD, ISP sops as compensation

Our Bureau

NEW DELHI, Sept. 6

Private telephone operators will be allowed to carry international voice traffic (ISD calls) from the country ahead of the original schedule of April 2004, with the Government announcing that the state-owned incumbent, Videsh Sanchar Nigam Ltd (VSNL), wi ll cease to be a monopoly with effect from April 1, 2002.

The decision was taken at a meeting of the Union Cabinet here on Wednesday, and is expected to send a positive signal to potential investors in the telecom sector when the Prime Minister, Mr. Atal Bihari Vajpayee, visits the US later this week.

The advancement of demonopolising VSNL will lead to the navaratna public sector undertaking (PSU) -- the Government owns 52.97 per cent stake -- losing sizable revenue.

Hence, after consultations with the VSNL top-brass, the Government has also decided to adequately compensate the corporation by way of granting it licences to operate as an STD service provider and a category `A' national Internet service provider (ISP).

As a national long-distance (NLD or STD service) operator, VSNL will have to pay entry fee of Rs. 100 crores. But a similar amount will be given to VSNL as part of the compensation package.

Also, the performance bank guarantee component of Rs. 400 crores will not be charged from VSNL for its NLD foray so long as it retains its status as a PSU.

VSNL will, however, pay licence fee by way of revenue-sharing. But the amount so paid, for a period of five years beginning April 1, 2001, will be given back to VSNL as part of the package, the Communications Minister, Mr. Ram Vilas Paswan, said at a pre ss conference.

He also said that VSNL, as an NLDO, will have to mandatorily contribute to the universal service obligation (USO) fund.

Additionally, the PSU will be granted a Category-A Internet service provider (ISP) licence which will enable it to provide Internet access all over the country as against six cities which it is confined to at present.

Mr. Paswan said that Salomon Brothers have been appointed consultant by VSNL to do a financial feasibility study and will submit its report within a fortnight. In the event, it is assessed on the basis of the report that additional component will be requ ired to be added to the package already approved by the Cabinet on Wednesday.

Among the proposals that the Government may consider are whether to allow DTS or MTNL to use only VSNL gateways for international voice traffic, as long as VSNL guarantees best customer treatment to these state-run operators, and also, whether the Govern ment should give a share of the licence fee received from new international operators to VSNL for a period of two years from April 1, 2003.

VSNL shares are listed on the stock exchanges in Mumbai, Delhi, Calcutta, Chennai and the National Stock Exchange (NSE). Its global depository receipts (GDR) is listed on the London Stock Exchange.

While the Government holds 52.97 per cent stake in the PSU, the overseas equity-holding is approximately 30 per cent and the remaining is with Indian financial institutions and the public.

The corporation was given a licence by the Department of Telecommunications (DoT) to operate as an international long-distance voice telephony (ISD) carrier in 1986. In 1994, it was accorded a monopoly in the ISD services segment for a period of 10 years till March 31, 2004. However, the Government, facing pressures from international investors, decided to advance the deadline of opening up international long-distance telephony by two years, thereby ending its monopoly.

The state-owned incumbent is among the very few companies in India having an earnings per share (EPS) of over Rs. 100. In the financial year ended March 31, 2000, VSNL reported a 39.68 per cent dip in net profit to Rs. 799.2 crores owing to writing down investment in ICO Global Communications.

The net profit would have been as high as Rs. 1,312 crores (Rs. 1,325 crores). Total revenues stood at Rs. 7,272.2 crores (Rs. 7112.8 crores). Telephone traffic during the year grew by 15.72 per cent on a year-to-year basis.