The Hindu Business Line : Telecom PSUs face dead end

IN what could be big blow to telecom majors Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), the Department of Telecommunications (DoT) is unlikely to grant them permission to venture into international long-distance services.

According to highly-placed officials in DoT, although both the PSUs have stated that they would like to offer ILD services, neither of them has as yet applied for it.

"However, in case they do apply, DoT may be forced to turn it down. In the current scenario, it does not make sense for them to venture into the ILD sector. It would be better for them to concentrate on their existing services," they said.

The officials noted that internationally, it has been seen that at the most only three ILD operators can survive in the market. The ILD space at present is already crowded. While VSNL is the only operator now, Bharti, Data Access and Reliance will be launching their services soon. To add to it, a couple of applications of other operators are also pending.

"Then, of course, there is the problem of the compensation package offered to VSNL for early termination of its monopoly. As part of the package offered to the company before its disinvestment, DoT had assured that both BSNL and MTNL would give preference to its international gateways even if there is a choice (of other ILD networks) available to them," the officials said.

In case both BSNL and MTNL start offering their own ILD services, then DoT would have to backtrack on its commitment to VSNL, which would also lead to legal wrangles. All these aspects would have to be carefully studied before they are given permission, the officials said.

Although it would be an unpopular decision, DoT feels constrained by the compensation package that was offered to VSNL. As and when it does decline their ILD applications, there is certain to be accusations that the department is stifling the growth of the telecom PSUs, and placing them at a disadvantage vis-à-vis the private operators.

It may be recalled that the MTNL board at its recent meeting had decided to go ahead and file its application for an ILD licence and to pay the necessary licence fee in this regard. The only decision the company is yet to take is whether from the point of view of taxation it will be advantageous for it to float a new company for this purpose.

Even BSNL officials have publicly stated that they would be applying for an ILD licence soon.

Both the PSUs consider an ILD licence necessary to make them competitive in the rapidly changing telecom scenario, to help them synergise their services and be more competitive; especially since their hitherto monopoly is being challenged by the private operators.

In particular, Tata, Reliance and the Bharti groups which have lined up impressive plans to offer a gamut of services ranging from basic, national long-distance and ILD services, which could eat into their existing market share.

Send this article to Friends by E-Mail

Stories in this Section
Swadhan network of ATMs in trouble -- US co threatens to remove software products

Telecom PSUs face dead end

Assured returns to foreign investors -- DoT pushing for further amendments to Cos Act

H1 ways & means limit for Centre at Rs 10,000 cr

GoM for group pricing of urea from July

Enron shares as `collectibles'

Satyam Info net loss up at $147.5 m

Satyam Info limited access may cost more

Centurion promoter Ahuja quits board

No rethink on rates

PMO to decide on dividend tax issue