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June 6, 2002 | 1251 IST
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VSNL focus now on end-users

Hemangi Balse

VSNL, a Tata group company, may go in for strategic investments in various telecom companies, across basic and cellular operations, to capture customers.

The company's business strategy involves getting access to end consumers, whose volumes will ultimately help VSNL negotiate the most competitive rates with outbound and inbound international carriers, and with national long distance operators.

The company now expects to enhance its direct customer contact which was hitherto non-existing. A long distance international service provider, VSNL already has an ISP license and a national long distance license. But to survive competitively in these businesses, it needs to be able to quote a substantial customer base.

A senior Tata group executive explained that with a host of service providers expected to become operational in the next few years, getting the finest rates from bulk service providers would require access to a strong customer base.

The official said VSNL would be open to taking a strategic stake in the access providers--basic and cellular--if only to confirm a captive customer base. "However, no firm decision has been taken till now and the company will examine options as they come along."

The proposed strategic investment --which may extend to full acquisitions--will enable VSNL to provide end-to-end connectivity for national and international calls.

As an international telecommunication service provider, VSNL does not have direct access to the end customer. "In fact, it does not know who its consumer is, and simultaneously, the consumer does not know who is the carrier carrying his calls," the official explained.

VSNL enjoyed monopoly as an ILD provider till March 2002. However, the government threw the sector open to private companies resulting in severe competition.

The VSNL management is of the opinion that unless it has access to its customer, it will not be able to provide competitive price with other vendors.

The revenue pie of VSNL is expected to shrink as it will not have pricing flexibility. VSNL is not in a position to fix the tariff independently of the rate that it pays to the international carrier, to the domestic access and the NLD providers. The access providers (BSNL and MTNL) continue to keep a part of the total customer revenue.

According to the divestment norms, Bharat Snachar Nigam and Mahanagar Telephone Nigam are expected to send their outgoing traffic through VSNL for the next two years as long as VSNL's service is competitive.

If VSNL fails to provide a competitive price, it risks losing this traffic.

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