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VSNL have already invested around Rs.15,000 crore (Rs.150 billion) on capital expenditure and another Rs 1,500 crore (Rs 15 billion) on acquisitions in this game plan,
with the intention of achieving the goals of being a global integrated player, leveraging strengths in both telecom and information technology.

The investments and restructuring of business models seems to be not working well for VSNL as several of the Tata's telecom businesses are not performing as expected. The combined losses of Tata Teleservices Ltd and Tata Tele Maharashtra Ltd are roughly Rs. 2,000 crore (Rs 20 billion). Broadband business is yet to take off.

With growing competition, VSNL's international long-distance business is on a downswing. And while VSNL's Tyco Global Network and Teleglobe acquisitions look great on paper, it could be a while before they pay off. Competition from RCovL on home needs to be countered. After Reliance's acquisition of FLAG Telecom in 2004, it has become a major competitor of VSNL with 65,000 km cable network. Although VSNL used to run Reliance's FLAG network but an international ruling has given FLAG the access to VSNL control center in Mumbai and hike its capacity to any level. RCoVL can now use this capacity to provide lower bandwidth rates.

Despite all that has happened or going to be, VSNL has some positives running with it. It has of course the tenacity of a great brand and a huge war chest. Now, it has also got a strategy chalked out for every one of its telecom businesses. This may help in better understanding of the requirements and scenario for every business unit individually. While addressing the mass market by scaling up its cellular and fixed wireless operations, VSNL is trying to cater global corporate business, shifting attention away from the profitable, increasingly squeezed international long-distance business. Vsnl's global appetite has already been whet to some extent by its recently approved South Africa foray, Second National Operator, which expects to launch commercial operations within six to nine months and would offer a range of services, including voice, data and limited-mobility access.

The Tyco and Teleglobe buy-outs (the former owns a 60,000 km cable network spread over three continents while the latter sells services to transmit data over the Internet) form a crucial piece in this global network. With MNCs looking for global footprints, VSNL needed to access bandwidth, which they have got at a good price.

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