VSNL has decided to position its future investments in a manner which will place it as a formidable player when competition creeps in. The detailed study had been conducted to identify areas that VSNL should remain in and the new ones it should enter. The firm is strengthening its infrastructure through investments in gateways, optical-fibre systems and business networks. The nigam 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 at present there is no bar on it for enteringother businesses, but it will concentrate on building and operating low-cost ATM and native IP networks globally to provide a range of telecommunication services at a low cost base.

New gateways will 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.

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

VSNL expects 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 from now 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. VSNL feels that voicetransmission through the net is not expected to emerge as a major threat owing to lowering of collection rates worldwide and the consequent reduction in arbitrage between net telephony and regular telephony. As regards call-back services, VSNL feels this will arbitrage the differential between the called and the calling countries. "As long as the Indian tariffs to the US are significantly higher than their tariffs to India, this differential will exist. India has declared the call back as illegal," said a VSNL source.

"However, since VSNL earns a steady Rs 10 per minute irrespective of the direction the traffic, the call back does not influence VSNL's profits. The nigam is confident that by rationalising telecom-accounting rates around the world, the percentage of call back will come down. Besides, of the total telephony traffic, only around 5 per cent is in the form of call back", the source said.