Aug 4, 2000|
VSNL: Growth is no problem
VSNL has been in the eye of a storm recently. First the company posted a flat growth in topline coupled with a decline in operating margins for the quarter ended 30th June. Second, and the bigger blow, came in the form of the government’s decision to dilute VSNL’s bandwidth monopoly.
We recently met up with Mr. Amitabh Kumar, Director Operations, VSNL to get a first hand view of the impact of the government’s recent decision and the steps being initiated by the company to shake off the sluggishness in growth. What follows are some of the key points that came out from our discussion. We will be posting an interview with Mr. Amitabh Kumar shortly in our ‘Face to Face’ section.
Growth in the international telephony business is not a big concern. VSNL is infact concentrating on driving up volumes. Traditionally VSNL has been getting 100 minutes of traffic per telephone line. With the total line addition in the country estimated at 5 million this year, growth would be there. Simultaneously, VSNL has been lobbying with the government to reduce international telephony tariffs. The move is aimed at capturing domestic outbound traffic. It is anticipated that the second round of rate cuts proposed by the TRAI will be implemented in September and this should give a boost to volumes. Its international telephony business is therefore anticipated to perform better.
The threat that the government may dilute the company’s monopoly prior to 2004 is however not a concern as the company expects to be adequately compensated. Also, the company anticipates that the DoT will continue to remain the leader in domestic telephony and naturally all the international traffic that emerges will be directed through VSNL. This also partially dilutes the concern that VSNL will face intense competition from private operators in the near term.
VSNL's value added services continue to record significant growth. Its ISP business is close to the 0.5 m subscriber mark. Infact the company has applied to the government for a category ‘A’ license, which will permit it to introduce ISP services across the country (as against six cities currently). If successful in procuring the license, the company sees a substantial increase in user base. It has also tied up with Hughes Tele.com in Maharashtra to offer an Internet service where the two service providers will share dial up charges (i.e. customers do not pay telephone charges). The company’s leased line business is witnessing explosive demand. However, the growth in revenues has been suppressed as the company has slashed rates by over 50%. VSNL is also planning to bid for a 3G licence, as and when the government opens up this service. It sees cellular telephony as having synergies with the company’s current operations.
Meanwhile the company has been aggressively adding to its bandwidth capacity and is currently in the process of buying a satellite. The move is aimed at beefing its infrastructure. As fallout, the competition has been left to explore costlier options.
Finally, VSNL is currently sitting on a hoard of cash, which is anticipated to increase further this year. The company’s planned capex of Rs 10 bn will be met from the cash generated from operations itself. However in coming years the capex could rise dramatically as the company makes a purchase of a satellite (Rs 8 bn).
VSNL surely seems to be getting a grip over the current situation. However concerns still remain in the form of government intervention, although Mr. Kumar insists that wide ranging autonomy has been given.
More Views on News
May 6, 2016
Bharti Airtel has reported a8.4% YoY growth in the topline and an increase of 2.8% YoY in the bottomline for the quarter ended March 2016.
Apr 27, 2016
Bharti Infratel has reported a 7.3% YoY growth in the topline and an increase of 18.7% YoY in the bottomline for the quarter ended March 2016.
Apr 8, 2016
Bharti Infratel has reported a 4.9% YoY growth in the topline and an increase of 11.5% YoY in the bottomline for the quarter ended December 2015.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407