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VSNL slashes rates of value added services

Jan 8, 2000

According to newspaper reports, Videsh Sanchar Nigam Limited (VSNL) has slashed the charges of its various services including leased lines, Internet access and web-hosting services. The rate cuts range from 25% to 90%. VSNL (FY99 Income Rs 71.76 bn) is India's monopoly provider of international telephony services. It also provides telex and telegraph services as well as value-added services such as leased lines, e-mail, internet and video conferencing.

VSNL's decision to slash rates is in anticipation of competition from companies that have been awarded licenses to set up international gateways for data traffic. So far, VSNL has had, as in international voice telephony services, a monopoly in this segment. The move will enable VSNL to grab and retain a larger chunk of the market share. It would, in effect, also raise the entry barriers. The company has been proactive in taking on competition.

The move may, however, not augur well for the company's bottomline. In order to minimise the impact of the rate cut, the company will have to take measures to significantly increase its customer base. This may prove to be a difficult task in view of the increasing intensity of competition in the data traffic segment.

The market for telecom related services are becoming increasingly competitive. It will become more so once VSNL's monopoly over the international voice telephony services is diluted in the coming years. The companies would then have to increasing look at generating bottomline growth by increasing volumes, as the prices would then be market determined. VSNL's proactive approach is a step in this direction.

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