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How does VSNL gain from this deal? TGN has almost 80 per cent of the existing fibre capacity on the Pacific route. A large part of the fibre is yet to be lit. However, on the Atlantic, there are 5-6 other submarine cables.
Tata officials point out that the growth will be in the traffic on the Pacific route, while the Atlantic route will provide a steady stream. Considering that the telecom and data boom is happening in the Asia-Pacific, TGN will provide quick connectivity for the region to the US. It is expected that bandwidth demand will double every year, a much more conservative estimate than that made prior to the dotcom bust. Bandwidth demand will also depend to a large extent on how quickly prices of handheld devices come down.

The Tata's process of acquisitions can be culminated with the acquisition of TGN in 2002. With this deal, VSNL becomes an end-to-end telecommunications solutions provider. TGN already has about 100 key multinationals among its clients. VSNL will now be in a position to give these customers a local point of contact for their entire network.

As part of this process, VSNL has already set up offices in Singapore, the US and UK. It now plans to open offices in Hong Kong and Europe. TGN has operating losses worth $70 million in the latest fiscal year. However, VSNL is starting on a clean slate and that "there is no debt whatsoever". Considering that many multinational companies are already on the network, that should not take them too long. The deal could also be just the right lever for the VSNL to consider expanding their telecom footprint to other parts of the world.

Success so far

By far telecom has been the top priority for the TIEBU. The basic idea is to cater to the mass market with wire line, cellular, fixed wireless terminal and broadband services and to tap the enterprise space by offering end-to-end solutions through Videsh Sanchar Nigam Ltd (VSNL).

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* Contributed by: -
Ashutosh Garg,
(Final year MBA Student)
ICFAI Business School, Kolkata