Data to talk for VSNL

VSNL will provide value-added services for corporates globally to stay ahead.

Four years back, VSNL looked on helplessly as its monopoly status as an international long distance telephony provider was rudely terminated by the government "� ahead of schedule. A license to operate in the national long distance space brought little consolation: without the carrier access code in place there was no way VSNL could go into retail and the competition was only getting worse. The telco had little choice but to go back to the drawing board. The gameplan: buy bandwidth and ride the outsourcing wave in the infrastructure and network space.

The acquisitions of Tyco Global Network (TGN) "� 60,000 km "� and Teleglobe together with two undersea cables (India to Europe and intra-Asia) will ensure that VSNL has an undersea network that circles the globe. As Prashant Singhal, Telecom Head at Ernst & Young, notes, " With this, VSNL will be in a position to offer better value to data customers in terms of a better integrated product." Adds another consultant, "Bandwidth may be a commodity, but being able to offer a customer seamless end-to end connectivity across the globe is a reasonably valuable proposition."

Moreover, as Srinivas Adepalli, Head, Corporate strategy, VSNL, explains, "With a bigger network, we are in a better position to manage prices and control costs." The danger of over-capacity of fibre, Adepalli believes is not real given that the market for bandwidth is growing at 100 per cent on some routes, driven by the demand from the IT and ITES sector. Singhal, too, does not believe bandwidth prices are vulnerable to a further fall.

But VSNL's not banking on bandwidth alone to bring home the bacon. Where it's hoping to make money, according to E D, N Srinath, is in value-added services in the global enterprise space, essentially in the area of remote network and infrastructure management. Says a consultant, "The concept of outsourcing or offshoring infrastructure and networks management is gaining ground especially since telecom connectivity has improved and though it involves a greater risk than software outsourcing, the processes for managing infrastructure remotely are well-tested."

Adds Singhal, "An AT&T or BT have been around for a long time, so VSNL may take time to penetrate the global market, but the direction is right, they have to think global." Alpesh Shah, Director, BCG, says the addressable opportunity could be in excess of $10bn over the next few years. He adds: "We are at the cusp of a big trend and this is VSNL's best chance to re-invent itself." VSNL is in a better position than equipment makers or pure IT players to operate in this space. "If VSNL and Tata Consultancy Services can work together, it would make for a winning combination," he feels.

That's already happening."We have started working together and have already bagged a couple of deals," confirms Adepalli. The big market, other than VSNL, which can be tapped is the business from the global telcos themselves. Says Shah, "Companies such as BT are looking to outsource their networks, billing solutions and production and design management, outside their home region. VSNL is in a good position to pitch for such deals because it has the advantage of the bandwidth to carry the traffic and also being located in India." BT, incidentally, already has 15,000 employees in India.

VSNL is also betting big on retail broadband in which it has already invested Rs 1,000 crore. Says Srinath, "We are hopeful that with WiMax we should be able to provide wireless broadband." VSNL now has a countrywide NLD backbone which can be leveraged. However, at an estimated 60 per cent of revenues in 2010, it's data traffic that's going to do the talking at VSNL.