In a move that could boost the sagging fortunes of the beleaguered Internet service providers (ISP) industry, Videsh Sanchar Nigam Limited (VSNL) has decided to reduce the annual rental of international bandwidth for international private leased circuits (IPLCs) by 35 to 40 per cent. It has also settled its outstanding dispute with FLAG Telecom and has allowed FLAG to sell its bandwidth capacity directly to ISPs with immediate effect and to international long distance (ILD) service providers from April 1, 2002.

Making this announcement, minister for communication and information technology Pramod Mahajan said 1000 megabits per second (mbps) of excess capacity of FLAG, which was lying idle till now, will now be pumped into the Indian market, thereby more than doubling the bandwidth available to the nation from 870 mbps to 1,870 mbps.

However, FLAG will have to pay interconnect and access charges to VSNL. FLAG director South Asia Niraj Gupta also said that the company was waiting for VSNL to approach FLAG for deciding on the access charges before it starts selling directly to other companies. He expressed hope that VSNL will live up to its promise of being fair and reasonable.

Another pay-off

VSNL has paid a special interim dividend of Rs 75 per share, adding up to a total of Rs 2,356 crore, including dividend tax. On Wednesday, VNSL presented a dividend cheque of Rs 1132.21 crore to Mr Mahajan for the 52.97 per cent shares of VSNL held by the government. Since October 2001, VSNL has paid a total dividend of Rs 3,926 crore, of which Rs 2,250 crore has been paid to the Government.

Meanwhile, Mr Mahajan denied that ending the exclusive arrangement with FLAG and allowing it to sell directly to other companies would have any adverse impact to the already dwindling valuation of VSNL. However, prospective VSNL buyers are disappointed at the decision and feel that the exclusive agreements VSNL enjoys with many companies was one of the big incentives for buying into VSNL. We expect the valuation of VSNL to go down by at least Rs 100-Rs 150 crore due to ending of the FLAG arrangement, said a senior official with a company in the fray for VSNL.

Experts are also questioning the haste with which the government announced that it was ending its exclusive agreement with FLAG just two days before the February 1 deadline for financial bids for a strategic stake in VSNL. More so, since the finer details and access sharing agreements, etc, are yet to be thrashed out between FLAG and VSNL.

...net profit down 10.74 pc in Q3 Our eFE Bureau in Mumbai

State-owned Videsh Sanchar Nigam Limited (VSNL) has reported a 10.74 per cent decline in its net profit for the third quarter ended December 31, 2001. The company has recorded a net profit of Rs 357.2 crore, compared to Rs 400.2 crore for the third quarter ended December 31, 2000.

Total income has also fallen by 6.54 per cent to Rs 1,926.8 crore, against Rs 2,061.6 crore for the corresponding period of the previous financial year. Other income has however increased from Rs 111.6 crore to Rs 188.2 crore in the Quarter ended December 31, 2001, resulting in an increase of 68.64 per cent.

For the nine-month period ended December 31 2001, VSNL has registered a net profit of Rs 1,091.2 crore and a total income of Rs 5,313.1 crore. According to a company press release, leased channel circuits grew by 132.5, while the Internet subscriber base has grown by 18.5 per cent.

Commenting on the financial results, VSNL chairman and managing director VSNL said, Despite a recession in the retail Internet industry, we have registered a reasonable growth in our Internet customer base. He added that the downward movement in Internet rates had not affected the revenue inflow from Internet services.

VSNL had earlier announced a record dividend of 750 per cent, which was preceded by another dividend announcement of 500 per cent. The company is expected to divest 25 per cent equity to a strategic partner by the end of the current financial year.