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VSNL: Dishnet in the net - Views on News from Equitymaster
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  • Mar 19, 2004

    VSNL: Dishnet in the net

    Consolidation was imminent among the 189 strong ISPs (internet service providers) and the fourth largest ISP i.e. VSNL, has taken the first step towards the same. VSNL has acquired the assets of Dishnet DSL for a consideration of Rs 2.7 bn. Dishnet DSL is an ISP, that offers internet accesses by way of digital subscriber lines, apart from normal dialup connections. Considering the fact that both VSNL and Dishnet DSL have been losing market share to competitors like BSNL and Sify, this acquisition by VSNL could define the future of VSNL's ISP business.

    According to the latest TRAI (Telecom Regulatory Authority of India) numbers, both VSNL and Dishnet DSL have been losing market share in the Indian market. VSNL currently, is the fourth largest as far as ISP subscriber base is concerned. After this acquisition, the company will rank as the second largest. While this acquisition will not only help VSNL significantly improve its subscriber base, it also enables the company to increase the scope of broadband services. VSNL is also mulling acquiring the broadband network of Tata Power.

    Internet subscriber base Sep-03 Dec-03 Growth
    BSNL 817,528 1,004,246 22.8%
    MTNL 708,360 691,717 -2.3%
    Sify 673,567 686,642 1.9%
    VSNL 652,284 629,411 -3.5%
    Tata Internet Services 178,214 178,875 0.4%
    Dishnet DSL 189,813 175,721 -7.4%

    Dishnet basically provides Internet services by way of DSL (digital subscriber line) as well as in dial up mode. DSL technology is basically broadband technology and it allows faster and larger quantum of data to be transferred across the network. DSL, apart from its retail clients, has a few corporate clients also and has a presence in 38 cities and 200 towns across the country (leadership position in select Southern markets). VSNL, by way of this acquisition, not only gets the assets of the company but also acquires key corporate accounts that Dishnet currently services. VSNL also gets higher exposure and reach into the retail segment by way of nearly 600 owned and franchised cyber cafes Dishnet owns.

    This acquisition is strategic in terms of VSNL's plans to roll out a long distance network across the country. The trend as far as telecom is concerned is that service providers are realizing the need for higher bandwidth for the transfer of larger volumes of data across networks. Due to this, telecom companies are looking out for laying or acquiring broadband infrastructure. VSNL, by way of this acquisition, has consolidated its presence.

    While it is difficult to gauge the financial impact of this deal on VSNL, at the moment, the benefits that are likely to accrue, both for the ISP business as well as the broadband business, seem promising. However, the falling ISP subscriber base of VSNL continues to remain a concern. Only time will tell whether this new acquisition will help VSNL achieve its ambitions of de-risking its revenue stream, especially since its ILD business (nearly 80% of revenues) is facing a lot of pressure from competition.



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