VSNL to carry all of BSNL's foreign calls

Tata group firm matches Data Access offer, to take Rs 200 cr hit.

Bharat Sanchar Nigam Ltd (BSNL) will route all international calls from its 42 million subscribers via the Tata-managed Videsh Sanchar Nigam Ltd (VSNL). The deal was struck after VSNL matched the Rs 1.69 per minute settlement rate to the US and UK offered by Data Access.

In the first round of bidding for BSNL's traffic to nine foreign sectors, VSNL had lost out on the crucial US, UK and Middle East sectors. Data Access had emerged the lowest bidder in these sectors, which account for 63 per cent of BSNL's international long-distance traffic.

VSNL has charged Rs 6 a minute as the settlement rate since April 2002.
Initially, in the first round, VSNL slashed the rate to Rs 2.20 per minute. Now, with the settlement rate coming down to Rs 1.69, consumers can expect a 15-20 per cent drop in international long-distance tariffs. Analysts predict that the cut in the settlement rates from Rs 6 to Rs 1.69 could lead to a Rs 200 crore fall in revenue for VSNL.

BSNL sources said the agreement with VSNL made sense since the two companies had a long-standing relationship. "Given the fact that VSNL is matching the offer made by Data Access, there is no need for us to route our international long-distance traffic through other companies. This also saves us the trouble of establishing new interconnect agreements and points of interconnection with other players," a BSNL executive said.

While this is good news for the revenue-sapped VSNL, for rival firm Data Access it rings in bad news. Recently, Data Access's initial public offer was put on hold after the Securities and Exchange Board of India raised queries about it. Of the 110 million minutes of outbound traffic every month from India, BSNL accounts for 80 million minutes.
 
Mahanagar Telephone Nigam Ltd, cellular operators and the other basic players account for 10 million minutes each.

Executives in Data Access, however, said the BSNL decision would not have any implication on its bottom line since its current business model was based on international long-distance traffic from private players, which account for about 10 million minutes a month. They said the company had garnered 30 per cent of the inbound international long-distance traffic and the revenue projections had been made on the basis of this model.

BSNL postpones ILD launch

BSNL has pushed back the launch of its international long-distance services by a few weeks because the necessary agreements with international carriers are still not in place.

"Discussions are on with international carriers and we will launch our international long-distance services as soon as we finalise an agreement with at least one carrier," a BSNL executive said.

The company was scheduled to launch its services today.