Telcos to put $400 m for EIG cable

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State-owned Bharat Sanchar Nigam Ltd (BSNL), Bharti Airtel, Tata Communications (formerly VSNL) and Saudi Telecom are investing around $400 million in an undersea cable link -- The Europe India Gateway (EIG) cable. Though the other telecom firms have stakes in other submarine cables, this would be the first undersea cable owned by BSNL in which the company is investing $50 million. Sources said that the company’s board has approved the investment in the project.

Once the cable is up, it would help BSNL offer more competitive rates for its broadband and international long distance tariffs.

BSNL, which is the largest broadband service provider in the country, derives as much as Rs 2,000 crore revenue from the segment, but analysts say that it stands a huge threat from Wi-Max, and the only way forward is capacity expansion which will be best done through participating in such consortiums.

Currently, Anil Ambani-led Reliance Communications and Bharti Airtel have the bandwidth axis rate control, and for BSNL, investing in undersea cable links, will allow it to keep a check on the costs as it is expected to reduce its reliability on the former two companies.

The state-run firm, which currently has 25 lakh broadband customers, is getting aggressive in this segment. “Apart from increasing the capacity, we want to bring down the costs and increase our top line. Investing in undersea cables will help us achieve all three,” an official told FE. The move is expected to cut down the company’s international bandwidth cost by as much as 60%.

BSNL had earlier entered into a joint venture for an undersea cable link with MTNL under Millenium Telecom, which was delayed for a long time and from which BSNL eventually pulled out.

The EIG cable link, which is an Atlantic cable link, will be completed by December 2009. International submarine cables are divided into Atlantic and Pacific lines. The Atlantic line carries traffic via the Middle East, UK and the US, while the Pacific carries traffic via Malaysia, Singapore and Japan. The Atlantic lines carry as much as 80% of the traffic while the Pacific only 20%. Indian telcos have been injecting huge amounts into undersea cables. The growing bandwidth demand and expected surge in future bandwidth applications has made Indian telecom companies infuse billions into undersea cable links.