BSNL, VSNL to share assets

Bharat Sanchar Nigam (BSNL) has agreed to lease infrastructure from the Tata-controlled Videsh Sanchar Nigam (VSNL) to offer international long-distance services.

In return, VSNL will charge BSNL only for the leased capacity, as opposed to its existing settlement rates for minutes of calls routed in and out of the country.

"It will take time for us to set up our own international long-distance infrastructure. We want to launch our services early next year and, therefore, have decided to use VSNL's network," Prithipal Singh, chairman and managing director, BSNL, told Business Standard. He added that the commercial terms were still being negotiated.

The agreement between the two companies gives VSNL a lifeline because it is now assured of international long-distance traffic from BSNL's fixed-line and cellular subscribers, which account for almost 70 per cent of the total Indian telecom market.

VSNL executives said the agreement would also ensure the two companies did not compete over international long-distance calls. "It will mean that the international long-distance infrastructure is not replicated in the country. Its a win-win scenario for both VSNL and BSNL," a VSNL executive said.

The two sides have been negotiating the deal for over a year. VSNL had earlier offered two options to the ministry of communications, including selling its entire international long-distance infrastructure to BSNL.

As per the existing agreement, BSNL has to route its international long-distance traffic through VSNL till March 2004. However, the rate charged from BSNL is steep, prompting it to explore other options, including severing ties with VSNL.

Had BSNL moved away, it would have dealt VSNL a death blow. Around 90 per cent of VSNL's international long-distance revenue comes from BSNL's 40 million fixed-line subscribers.

Good deal

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• Deal bails out VSNL, whose profits have been dipping
• VSNL may end up as ILD infrastructure provider, more than being an operator
• BSNL saves on setting up new ILD infrastructure
• BSNL also benefits from not paying settlement rate to VSNL