Telecom rates crashing.

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Telecom rates crashing

VSNL may lose out as Data Access offers to carry BSNL calls to US, UK at Rs 1.69 a minute

Thomas K Thomas in New Delhi

Published : March 9, 2004

In a blow to Videsh Sanchar Nigam Ltd’s (VSNL’s) monopoly in international long-distance services, the Siddhartha Ray-promoted Data Access has emerged the lowest bidder for carrying traffic from Bharat Sanchar Nigam Ltd’s (BSNL’s) subscribers to the US, UK, Canada and West Asia. These sectors account for over 63 per cent of the public sector company’s outbound traffic.

International long-distance rates in the country are expected to crash, with Data Access quoting a settlement rate of Rs 1.69 per minute, compared with Rs 6 offered by VSNL at present.

If BSNL accepts Data Access’s offer, calling rates to the US, UK and Canada could come down by almost Rs 4 a minute.

Settlement rate is the charge paid by the international long-distance operator in India to international carriers like AT&T and Worldcom for carrying its traffic to foreign destinations.

VSNL has emerged the lowest bidder only for calls to Europe, Australia, New Zealand, the South Asian Association for Regional Co-operation countries, Saudi Arabia and Africa, which together account for 33 per cent of the country’s international traffic.

Reliance Infocomm is the lowest bidder for the Southeast Asian sector, which includes Singapore, Thailand, Indonesia, Malay- sia and Hong Kong. Bharti Tele-Ventures had also bid for the seven international long-distance sectors but failed to get the lowest bid in any of them.

If BSNL allots the contract to the lowest bidder, VSNL will stand to lose around Rs 400 crore annually.

But VSNL sources said it might not have any major effect on the company’s bottom line since a major chunk of the settlement rate would have to be passed on to the international carrier.

VSNL also gets a significant part of its profits from sharing its international long-distance infrastructure with BSNL. The two companies have already signed an agreement for sharing infrastructure till February 2005.

BSNL is also expected to launch its international long-distance services before March 31, and is in talks with international carriers for settlement rates.

Therefore, the settlement rate offers will be relevant only for 2-3 months. According to VSNL sources, the company has offered to negotiate on the settlement rates after April 1.