VSNL, already bearing the brunt of competition where it enjoyed a monopoly in the past, felt the pricing war taking a toll on it on Tuesday as reports have emerged that celluar companies plan to slash ILD tariffs.
The scrip of the overseas telecom service provider moved lower by 2.1% to Rs 87.50 on BSE in mid-morning trades. The scrip was trading close to the day's low of Rs 87.30. Around 16,600 VSNL shares changed hands on BSE in around two hours of trading.
Reports have emerged that cellular companies, which slashed national long-distance rates recently, now plan to make big cuts in international call charges. As per reports, cellcos plan to slash international call rates by 50% to Rs 12 per minute from Rs 24 per minute charged for calls made to the United States, Europe and the Middle East. Earlier, there were reports that cellular companies may slash rates by as much as 62% to Rs 9 per minute.
There has been a steep fall in ILD rates after international long distance services were opened up from 1 April 2002. This effectively ended VSNL's monopoly in ILD.
Presently, VSNL is the largest ILD player with more than 50% market share.
The impact of falling tariff and intensified competition is clearly visible in VSNL's financial performance also. For the first half, VSNL's revenue plummeted 16% to Rs 2620.9 crore (Rs 26.2 billion) and net profit dipped 31% to Rs 507.10 crore (Rs 5.07 billion). That has taken its toll on the VSNL counter which currently trades at a multi-year low.
In mid-November 2002, after months of negotiations, VSNL signed an agreement on 19 November 2002 with BSNL for interconnecting their networks. As per the agreement, VSNL will now pay BSNL the same rates that private operators like Data Access, Bharti Telesonic and Reliance pay to bring in phone calls from outside India and connect to BSNL's network but it will get 30% discount on these rates for a committed traffic of 90 million minutes a month. The agreement is valid retrospectively for the year up to March 2003. Thereafter, both the companies have to negotiate a further year-long interconnect agreement.
VSNL is the preferred international carrier for BSNL till April 2004.
Some time ago, VSNL soft launched its national long-distance service in the country from six centres, including Mumbai and Ernakulam.
VSNL is a leading Internet service provider. India's internet subscriber base stood at 38 lakh customers on 30 September 2002, with VSNL and Satyam leading the race amongst Internet service providers, with a subscriber strength of 600,0000 each.
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