The company's other income was down 38 per cent at Rs 213.4 crore against Rs 344.3 crore while depreciation has increased by 25 per cent to Rs 46.7 crore. The earnings per share on an annualised basis stands at Rs 147.73.

On a quarterly basis, the net profit is down by 18.39 per cent in the second quarter at Rs 193.4 crore against Rs 216.8 crore during the same period last year. The income is down by 1.07 per cent at Rs 1,663.2 crore against Rs 1,681.2 in the second quarter last year while the depreciation has gone up by 19.15 per cent to Rs 22.4 crore.

The company said that the drop in other income was a result of the depreciation of the rupee, which was only Rs 1.10 in the first half of this year against Rs 2.99 in the same period last year. The steep cut in ISD rates, especially in the peak and non-peak tariffs has also contributed to the decline in revenues.

However, increasing Internet business and new avenues like domestic long distance services are expected to improve bottomeline in the next half, the company said. Income from Internet grew by 94 per cent to Rs 98 crore while other value added services such TV uplinking contributed Rs 27 crore in the first half against Rs 22 crore in last year's first half.

VSNL is planning to use its infrastructure for the long distance telephony once the Government opens up the sector for competition.

VSNL is considering an initial investment of $10 million in the US-based telecom start up CTR group's major venture, Project Oxygen. The project, estimated to cost $14 billion, is a super Internet with 32,000 km global optical fibre submarine cable network based on asynchronous mode technology connecting most of the parts of the world. The company said that participating in this would add to its international transmission capacity at significantly lower costs and also enable to provide multimedia and Internet capability on a global basis.