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G. Rambabu

NEW DELHI, Feb. 5

THE Tata group seems to have hit a jackpot by acquiring strategic stake in Videsh Sanchar Nigam Ltd (VSNL).

According to analysts, with one stroke, it will be able to be a dominant player in the international long-distance (ILD) and Internet services, even as it is readying to make a foray in the national long-distance (NLD) segment. The group already has a presence in the cellular and the basic services, making it the first fully integrated telecom player in the country.

While its rival in the VSNL bid - Reliance - has for long been talking of being the first such player in the Indian market, its ground operations are yet to take off. It has a limited basic and cellular network, which is operational; its Internet, NLD and ILD services have not yet seen the light of day.

Bharti, the other big player, does not have a presence in the ILD segment, having opted out of the race for VSNL a couple of months ago. It, however, does have a sizable cellular and Internet presence, even while its basic and NLD operations are in the take-off stage. Analysts noted that having acquired control over VSNL, the Tata group will now be able to synergise all its existing operations even as it can cut costs by availing itself of the concessions being granted by the Government for early termination of the monopoly on ILD services.

The financial benefits given to VSNL include a five-year reimbursement of licence, entry and revenue sharing fees and exemptions from performance bank guarantees, all which the Tata group will get.

The group will in any case have a head start in ILD services over the other potential entrants, as far as the existing customer base is concerned.

What is more, VSNL has also planned to go full steam ahead with its NLD services. Instead of picking up a licence for the same, the Tata group can now avail itself of this shortcut. The group had earlier made a tentative investment of Rs 1,000 crore, for rolling out these services. This could now be scaled down considerably.

As regards basic services across the country, at present it offers the services in Andhra Pradesh, and is due to roll out new operations in the four circles of New Delhi, Gujarat, Tamil Nadu and Karnataka.

Meanwhile in the Internet segment, it was earlier proposed to merge Tata Internet Services Ltd with its basic service operations. This was being considered in the light of the plans for offering broadband services in all its circles of operations.

However, since VSNL is the market leader in this business with a share of about 50 per cent in the major cities, the Internet services of both these companies could be merged, analysts say.

VSNL already has a ready Internet subscriber base of 6.6 lakh, having rolled out ISP services in the four metros and its own Internet nodes at 18 cities. The Tata Internet services network is now present across 32 cities in the country.

The only problem areas that could remain are in the cellular segment, where the group has merged its operations with Birla and AT&T, even while talks are on with BPL for further amalgamation.

The acquisition of VSNL stake does not somehow fit in with its cellular game plan, analysts say.

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