VSNL's monopoly over Internet traffic to be diluted
VSNL's (Videsh Sanchar Nigam Limited) monopoly over international gateways is likely to be diluted with the government likely to give clearance to a private international gateway. The private gateways, however, will be permitted to carry only Internet traffic.
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.
Alternatively put, VSNL's monopoly over data traffic has been diluted. Infact the government is likely to give atleast 8 projects an in principle clearance in the coming days. The move will make the business environment more competitive for VSNL. However from the point of view of domestic Internet infrastructure, the decision to permit private international gateways is a step in the right direction.
VSNL has been grappling with a lower topline growth, which is mainly the result of the Trai's imposition of lower tariff rates. Coupled with this, the company's value added services (like Internet services) have also been facing intense competition. However, the growth in these services continues to be robust. Now with its monopoly over international gateways diluted, the company would face enhanced competition as Internet service providers have the option to link directly to international hubs via their own or other private sector gateways.
With its monopoly over voice traffic too scheduled to end in Year 2002, VSNL would need to gear up to take on competition in every aspect of its hitherto protected businesses.
The government's decision needs to be lauded, as it would go a long way in improving the Internet infrastructure in the country.
Analysts have rated the stock as a 'BUY' on account of its foray into value added services like Internet access and the government's proposal to divest a 26% of the company in favour of a strategic investor.
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