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VSNL plans domestic foray - Views on News from Equitymaster
 
 
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  • Oct 13, 1999

    VSNL plans domestic foray

    According to newspaper reports, Videsh Sanchar Nigam Limited (VSNL) is to make a foray into domestic telephony services, in particular the long distance telephony services. This follows the nod given by the Department of Telecom (DoT).

    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.

    A domestic foray will provide VSNL with an opportunity to boost its top line growth, even as the international telephony market becomes more competitive. This foray will make it a more integrated telephony services provider.

    VSNL is aggressively pushing its internet access business. However, it is constrained in its reach, as it has a presence only in select cities including Delhi and Bombay. A domestic presence will help the company in establishing a nation wide reach for selling its value-added products. Moreover, it will enable it in bundling telecom services, which will give it a competitive advantage over several of its competitors.

    The domestic telephony market has recently witnessed the entry of a number of private sector players with even the government controlled Mahanagar Telephone Nigam Limited (MTNL) becoming more aggressive. This scenario is likely to make VSNL's domestic foray a difficult task, which will have a very long breakeven period. The foray will involve large amount of funds, a large part of which would have to be sourced from external sources. This could put pressure on the company's bottomline till the time the venture starts generating returns.

    Market View:
    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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