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VSNL to get 30% off on incoming calls

BS Economy Bureau in New Delhi

Videsh Sanchar Nigam Ltd and Bharat Sanchar Nigam Ltd on Tuesday ended an over six-month-old dispute on interconnect and revenue sharing for international long-distance services.

Under the compromise formula, VSNL agreed to meet the commercial rates offered by other ILD operators on outgoing calls to BSNL, in return for a 30 per cent discount on incoming calls if the traffic was more than 90 million minutes a month.

VSNL has signed a similar agreement with Mahanagar Telephone Nigam Ltd.

"As per the agreement between the two sides, VSNL has agreed to the standard terms of interconnect and revenue sharing arrangement as applicable to other ILD operators like Data Access, Bharti Telesonic and Reliance Infocomm. The deal is a win-win for both sides," a top BSNL official said.

But the agreement will be valid till March 2003 after which it will be renegotiated.

N Srinath, director (operations), VSNL said: "In the circumstances, it was important to finalise a deal with BSNL. With this deal, we will get some revenues. The agreement is also valid for six months, giving us an opportunity to renegotiate in March if the market situation changes." Srinath added that the agreement would take care of VSNL's concerns to some extent.

For incoming calls, BSNL will now charge between Rs 4.40 per minute and Rs 13 per minute, depending on the distance the firm will carry the call within the country.

While this is the same for all other ILD players, BSNL has offered an additional 30 per cent discount to VSNL for bringing in more than 90 million minutes of traffic a month.

Since VSNL currently brings in almost 3.2 billion minutes of traffic a year, this will effectively mean that BSNL will charge an average of Rs 5.50 per minute, instead of Rs 7.50 per minute as charged on other operators.

"While this means a loss of Rs 2 per minute for BSNL, our attempt is to give incentives for large volumes so that VSNL continues to bring in high traffic," a BSNL official said.

With incoming calls being five times the outgoing calls, VSNL may have got a good deal here.

On outgoing calls, VSNL will get Rs 6 a minute for calls to the United States, Rs 14 for calls to the Gulf and Rs 9 for calls to any other place in the world. This is same for other ILD operators.

Telecommunications analysts, however, pointed out that VSNL had to give more than what it got.

"The agreement is more or less in line with what BSNL had offered VSNL three months ago. BSNL had also offered discounts on incoming calls. The only difference was that VSNL might have got a higher discount than what BSNL was prepared to offer initially," an analyst said.

The revised formula will have some revenue implications for VSNL. According to analysts, VSNL revenues are expected to fall 30 per cent this year.

This, of course, is not just because of the deal with BSNL but also because the international settlement rates and the ILD tariffs have come down significantly.

For BSNL, the gains made on the outgoing revenue share are expected to compensate the firm for the Rs 2 per minute loss on the incoming calls.

The new arrangement between BSNL and VSNL will be applicable with retrospective effect from August 1.

The agreement will dash all hopes of the other ILD operators of claiming a pie of the outgoing traffic because BSNL will now route most of its calls through VSNL.

"The competition will be over incoming traffic because it depends on the settlement rates being offered by ILD operators to the international carriers and not on the VSNL-BSNL agreement," said a Bharti official.

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