Indian telecom giants to take on global leaders - Views on News from Equitymaster

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Indian telecom giants to take on global leaders

Mar 18, 2000

The Indian telecom giants, Videsh Sanchar Nigam Limited (VSNL), Mahanagar Telephone Nigam Limited (MTNL) and Telecommunications Consultants of India Limited (TCIL) have initiated steps to form a consortium to bid for telecom projects in developing and the African the countries. 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.

MTNL (FY99 Revenues: Rs 52.47 bn), a public sector company, is a franchise of the Department of Telecom. The company has a 15-year telecom license to operate in New Delhi and Mumbai until the year 2013.

The onslaught of private sector competition seems to have led the public sector telecom companies to huddle together in their quest to preserve their profitability and growth. The venture highlights the other alliances being entered into various public sector companies in an attempt to ward of competition from private sector players. The decision by the three companies to venture together in the international arena, however, seems a logical move. The three companies have complementary skills – MTNL in retail services, VSNL in international telephony and Internet services and TCIL in project execution related work. Together the three companies will command the financial and technical base needed to bid in international projects. It will also help these companies in boosting their growth prospects in view of the intensifying competition in the domestic markets.

On the other hand, this move could have an effect of thinning out the companies’ resources, especially in view of the large potential of the Indian market.

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