VSNL plays down BSNL long-distance entry

Videsh Sanchar Nigam Ltd has claimed that the entry of Bharat Sanchar Nigam Ltd into the international long distance operations would not have any immediate impact on VSNL's revenues, as the PSU is expected to take at least one year to put its network in place.

VSNL sources said: "BSNL will take at least six months to set up the gateway and another six months to get the necessary clearances and for conducting pilot tests. As it is, we are prepared for a scenario whereby we would face competition from BSNL by 2004."

As per the agreement signed between the government and the Tatas at the time of divesting the former's stake in the long distance company, the Union Cabinet had given an assurance that BSNL would treat VSNL as the preferred carrier for a two-year period.

"The two year period would have anyway come to an end in 2004. So we had taken this into consideration while making our business plans," said the VSNL source.

The government's green signal for BSNL's foray into international long distance plans on Wednesday had raised serious doubts over VSNL's future.

This was because the Tata owned company would lose almost all its international call business from the over 40 million fixed line subscribers in the country owned by BSNL. The subscribers ILD calls would be routed through the gateway of the PSU itself.

MTNL would also route its ISD calls through BSNL and cell firms have already signed on with Bharti Telesonic.

According to VSNL sources, the management had already anticipated such a scenario and have made alternative revenue generation plans.

Earlier the government had refused BSNL and MTNL to foray into the ILD sector on grounds that it did not want to create another long distance company after having decided to exit from the segment by divesting stake in VSNL.

Former minister of communication Pramod Mahajan had in fact proposed to merge the two PSUs and then give the ILD licence to the merged entity.

Insiders say that the change in ministry's mind came after Mahajan came to know of his dismissal from the Cabinet.