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VSNL's international phone monopoly lingers on

Robin Elsham

A big bang that was not.

Three months after India opened its $1.3 billion international phone market to competition, a government-founded company retains a monopoly and charges remain among the highest in the world.

Three companies hold licences to start services -- Bharti Telesonic, a unit of New Delhi-based Bharti Tele-Ventures, Data Access, a subsidiary of Hong Kong's Pacific Century Cyberworks, and Reliance Communications, part of India's powerful Reliance group.

But delays in obtaining security clearances and in signing inter-connect agreements have blocked any competitor from entering the market, according to company executives and telecom analysts.

"Bharti has not started its service for the simple reason it lacks security clearance," said a Mumbai-based telecom analyst.

Failure to seal inter-connect charges with the two state-run companies that dominate India's fixed-line market is also to blame, said Kobita Desai, a telecom analyst for Gartner Inc.

By default, Videsh Sanchar Nigam Ltd remains the only service provider, even after New Delhi privatised the company in February and opened the international call market to competition from April 1.

Simultaneously, the government began permitting a drastically cheaper, but lower quality, dial-up Internet telephone service to customers using computers.

But it hasn't made a dent in a phone market expected to be one of the world's fastest growing this decade since computer penetration in India is quite low.

"What's changed?" asks Naresh Patil, 42-year-old stock broker in Mumbai. "I still need a bank loan to pay my phone bill for June when I called to assure them (relatives living in three foreign countries) India and Pakistan weren't going to war."

A MATTER OF TIME

Analysts insist it's only a matter of time, though, before call charges drop sharply when other service providers finally enter the market, touting cheaper rates in a battle for market share in a volume-driven business.

"Rates could drop 50 to 60 per cent," said Gartner's Desai.

Depending on the time of day, VSNL now charges Rs 27.2-40.8 (56-84 cents) per minute for a call to the United States.

Bharti plans to charge Rs 21.18-24.00 per minute for a similar call, and may get permission to begin doing so soon.

"We have to obtain a security clearance, which is expected any day," said Bharti Telesonic chief executive officer N Arjun.

Arjun said service would begin within hours of getting that clearance as the network has been in place since early April.

"We have already signed an inter-connect agreement with BSNL, and are doing so this week with MTNL."

BSNL is state-run Bharat Sanchar Nigam Ltd, which provides fixed-line services everywhere in India except Mumbai and Delhi. In those two cities the state-run Mahanagar Telephone Nigam Ltd was for long the monopoly provider of local phone services.

"By the first week of August, we will be offering ILD to fixed-line subscribers across the entire country," Arjun said.

By early April, Bharti had finished installing international gateways in Mumbai and Chennai, laying a high-capacity fibre-optic cable to Singapore and signing agreements with international carriers to complete its network backbone.

Data Access too is awaiting security clearance after signing inter-connect agreements with more than a dozen international carriers months ago.

It also has an agreement with BSNL to terminate calls via its network and to transmit calls from it to overseas destinations, a company spokesman said.

A spokeswoman for Reliance Communications, a unit of India's powerful Reliance group, said that company had neither applied for security clearance nor started negotiating interconnect charges and had no target date for starting service.

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