The company has decided to position its future investments in a manner which will place it as a formidable player when competition is opened up.The detailed study has been conducted to identify the areas that VSNL should remain in and the new ones it should enter. The company is strengthening its infrastructure through investments in gateways, optical fibre systems and business networks.

VSNL has decided to earmark 25 per cent of its future investments in developing new service platforms - global mobile system, satellite multimedia services, ATM, internet and DTH. This is expected to help VSNL spread its income profile over areas distinct from basic telephony.

On its diversification strategy, the company feels that there is no bar on itentering into other businesses but it would concentrate on building and operating low-cost ATM and native IP networks globally to provide a wide range of telecommunication service at a low-cost base.

New gateways would be added in high revenue generating areas and the company has also decided to focus on value-added services like the internet, DTH and global mobile systems.

"Interestingly, the Telecom Commission has made a commitment to WTO to review the domestic long-distance sector in 1999. Should this liberalisation transpire, VSNL would strive to bid for the long-distance network which could emerge as a big growth opportunity," said a source.

VSNL expects the traffic to grow at around 20 per cent per annum. The share of value-added services is expected to increase to around 15 per cent of the total income in five years as against the current level of 10 per cent.The company dismisses off threats of its core income from voice transmission through the internet and call back services from the US. VSNLfeels that voice transmission through the net is not expected to emerge as a major threat due to the lowering of collection rates worldwide and the consequent reduction in arbitrage between net telephony and regular telephony.

As regards call back services, it feels that this would arbitrage the differential between the called and the calling countries. "As long as the Indian tariffs to the US are significantly higher than US tariffs to India, this differential will exist. India has declared the call back as illegal.However, since VSNL earns a steady Rs 10 per minute irrespective of the direction of the traffic, the callback does not influence VSNL's profits. VSNL is confident that by rationalising telecom accounting rates around the world, the percentage of call back will trend down. Besides, out of the total telephony traffic, only around five per cent is in the form of call back," said the source.