Financial Daily from THE HINDU group of publications
Friday, Jan 31, 2003
Info-Tech - Telecommunications
VSNL in talks with Bharti for sharing infrastructure
NEW DELHI, Jan. 30
THEY may be rivals in the international space, but are sure shaking hands on domestic ground.
Even as it is trying hard to ward off competition from the Bharti group to retain its dominance in the international long-distance (ILD) sector, Tata-owned Videsh Sanchar Nigam Ltd (VSNL) is in talks with its telecom rival to share its national long-distance (NLD) infrastructure.
According to industry sources, VSNL, which has got a licence to offer NLD services and has already linked eight cities on a pilot basis, is now proposing to lease bandwidth on Bharti's optical fibre network to reach out to the rest of the country. Although nothing has been finalised as yet, the talks have made considerable progress, they said
The sources noted that with competition in the telecom sector intensifying and the margins being squeezed, it is but natural that rivals join hands to share infrastructure and cut costs. Telecom companies have a choice of either laying their own network or leasing capacity from other operators.
Since there is bound to be an overcapacity in the bandwidth space, with companies like Reliance, Bharti and BSNL already having a network and many more like Powergrid, GAIL and NHAI proposing to do so soon, it makes business sense to lease space from any of them, rather than duplicating the network, they said.
The company has consciously decided to adopt a build-and-buy model for its NLD operations, which would mean it would set up the infrastructure in some areas and would lease or acquire broadband infrastructure businesses of other companies. The NLD licence, it may be recalled, was offered to VSNL as part of the compensation package for early termination of its monopoly in the ILD sector two years ahead of schedule in March 2002.
The sources noted that this is not the first time that the Tata and Bharti groups will be getting together. Another Tata company - Tata Teleservices Ltd (TTSL) has a similar understanding with the basic services arm of the Bharti group for its operation in Delhi. The company has leased bandwidth from the Bharti networks in some parts of the city.
They said that VSNL had originally planned to invest close to Rs 2,000 crore for its national network. However, it has been scaled down considerably and is now pegged at Rs 1,300 crore. While Rs 500 crores has been budgeted for the current fiscal, the remaining is to be invested in 2003-04.
The NLD move is part of the overall strategy of the Tata group, which involves presence across the entire telecom spectrum. The group also proposes to transfer the broadband business of Tata Power to VSNL as part of the move. This is expected to reduce its dependence on other operators for domestic connectivity and allow it to retain a greater share of revenue from international calls. At present, the company has to shell out a huge amount to BSNL and MTNL as interconnection charges for its international traffic, they stated.
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