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VSNL eyes long-distance rollout by year-end

Indian telecoms giant Videsh Sanchar Nigam Limited, set to lose its monopoly as the country's overseas calls carrier next April, hopes to roll out its national long distance phone service by the end of this year, its chief said on Tuesday.

S K Gupta, chairman and managing director, told Reuters that VSNL was in talks with companies having or laying a nationwide optic fibre network to buy or lease capacity for its foray into domestic long distance telephony.

State-run VSNL, due to be privatised this year, has been promised free entry into national long-distance telephone business as part of a compensation package for ending its monopoly on overseas calls two years ahead of schedule.

"We will not be laying our own network in the first phase, we have invited responses from various companies laying fibre. We might either buy bandwidth, buy a dark fibre or even an entire duct," Gupta said.

The companies VSNL has targeted include the Reliance group, New Delhi-based unlisted Bharti group and state-owned telecoms giant Bharat Sanchar Nigam Ltd.

BSNL is the only long-distance telephone operator now while Reliance and Bharti have received government approvals to enter the business, which was opened to private competition last year.

The Reliance group, through a group company Reliance Infocom, is laying a 60,000 km (37,500-mile) broadband optic fibre network connecting 115 cities, whereas Bharti is laying a 35,000 km (22,000-mile) network initially connecting 65 major cities.

Gupta said the New York Stock Exchange-listed VSNL had earlier considered buying a stake in a company laying optic fibre infrastructure, but that plan was abandoned following the government's decision to privatise the company.

"We did not want to get to a situation that a company we buy into is a competitor of the one that ultimately acquires us. But at the same time, we cannot hold off our plans to enter the business indefinitely," Gupta said.

"To start with, we'll look at an arrangement which will meet our roll-out obligations (set by the government) for the first two years," he said.

The government, which owns a 52.97 per cent stake in VSNL, plans to bring it down to 26 per cent. It proposes to do this by selling 25 per cent together with management control to a strategic partner and another 1.97 per cent to VSNL's employees.

The sale of VSNL, which has cash of over Rs 40 billion ($848.9 million), is billed as one of India's most ambitious privatisations in a decade of economic reforms.

The government has received six bids for VSNL. The bidders include the three biggest industrial groups in India -- the Tata, Birla and Reliance groups, a Bharti-Singapore Telecom combine, consumer appliances maker Videocon group and a consortium led by telecom firm BPL Communications.

The Birla group recently dropped out of the race.

Bidders are currently involved in the due diligence process on the company.

BEEF UP INTERNET OPERATIONS

Gupta said VSNL had also drawn up plans to expand its web business, after it received a licence to operate Internet access services all over India as part of the compensation package.

Gupta said VSNL had expanded its operations to 12 cities recently and planned to increase this to 20 by the year-end.

VSNL is India's first and largest Internet access provider and had nearly 650,000 customers at the end of June.

Gupta said the company had also deferred plans for a tie-up with a private Internet portal in a bid to upgrade content as "discussions had not been satisfactory".

The firm was in talks with seven portals for a deal under which the one selected would be the home page for VSNL's subscribers and it could share the portal's e-commerce revenues in exchange for driving traffic to the site.

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