VIDESH SANCHAR NIGAM LTD
CHAIRMAN`S STATEMENT
INTRODUCTION
It gives me great pleasure to welcome you all to the 15th annual general
meeting of your company. When we look back at this time from the future, I
believe we will view it as one of the most momentous stages in VSNL`s
history. The Indian telecommunications sector is witnessing rapid new
changes, based on government deregulation and new technologies. VSNL is
actively participating in those changes and will, in fact, be driving many
of them. We have a number of exciting opportunities, both to enter new
businesses and to strengthen our offerings in our existing business lines.
We also have new competitors, both existing and anticipated, especially
since the government has decided to terminate our monopoly in basic
international telephony in April 2002. Another major development is that
the government has decided to divest a 25% stake in VSNL to a strategic
partner, with the right to management. By the end of this year, your
company may be under private management. All these developments add up to a
real chance for VSNL to continue to lead the Indian telecommunications
market not by default, but by design and merit.
PERFORMANCE REVIEW
VSNL`s performance in the last year has been excellent, both operationally
and financially. The volume of international telephone traffic carried by
the VSNL network rose by 19.71%, while specialised services recorded a
revenue growth of 22.74%. However, tariffs and settlement rates -that
govern payments for international telephone services between telecom
providers of two different countries - continued their downward trend.
Therefore, despite the volume growth, total revenue grew 10.3%, from Rs.
72.22 billion to Rs. 79.66 billion. Nevertheless, our profit after tax
showed an excellent growth of 111.68%, from Rs. 8.41 billion to Rs. 17.79
billion.
CONTINUING LEADERSHIP
VSNL is currently one of the largest and strongest companies in the Indian
telecommunications sector. It compares very favourably with telecom
companies in the rest of Asia too. Moving forward, we expect to continue to
lead the Indian telecom market not because of a monopoly, but because we
are a strong player with a whole range of competitive advantages. We have
excellent technology and infrastructure that represents billions of rupees
that we have invested over the last 15 years. We have a strong brand name
that we are now building further. We have a large existing customer base.
We have skilled and experienced employees. We believe that all these assets
will keep us firmly in the top position.
VSNL intends to continue its market leadership through a three-fold
strategy. First, in our existing business lines, we will continue to
innovate with new products, better services and competitive pricing.
Second, to ensure rapid future growth, we are planning a special thrust on
some areas, in both existing and new businesses. Third, we will continue to
invest in infrastructure to support both new and existing businesses.
Basic services: early termination of monopoly
In September 2000, the Government of India announced that it will terminate
VSNL`s monopoly in international telephone services from April 1, 2002, two
years ahead of schedule. The government plans to compensate VSNL for this
early termination with a package including an all-India Internet Service
Provider (ISP) license, a license to enter domestic long distance (DLD)
services and certain benefits with regard to this DLD license. The
government has further said that it would review this compensation package
if it is found insufficient in the course of time. The government asked
VSNL to place the compensation package before an extraordinary general
meeting held in May 2001, at which the package was approved.
Even after the international long distance business is opened up to
competition, we fully expect to continue to be the market leader, given the
advantages I have outlined earlier. Additionally, since this business calls
for high investments, we do not expect a flood of new players. Besides, the
Indian telecom market is a developing one and is growing at a rapid pace.
More players could well expand the market rather than fighting for market
share. We have already seen this to be true in many developing countries.
Therefore, we expect a healthy growth in our core business of international
telephony services. This business will continue to be the major contributor
to our revenues for quite some years to come.
Internet services
At the same time, to drive our future growth, we are planning a special
thrust on some areas, in both existing and new businesses. The Internet
business is one. Since November 1998, the ISP business has become highly
competitive: 437 new private ISPs have been licensed and approximately 98
are already in operation. Despite that, VSNL is the leader in this business
with a market share of about 50% in the major cities where we operate. Our
subscriber base grew 72.19% during the year to 630,970 in March 2001. This
demonstrates our ability to perform in a competitive environment and to
attract, retain and delight our customers.
Until last year, we were somewhat restricted in this business because we
were allowed to operate in only six cities. However, the government has now
granted us an all-India ISP license, which will allow us to expand our
leadership rapidly. We have already increased our presence to 17 cities and
hope to reach a total of 22 cities by March 2002. To support the rapid
future growth that we anticipate in this business, VSNL has expanded its
Internet bandwidth from 167.1 Mbps in March 2000 to 804.128 Mbps in March
2001. We plan to increase this to 1344 Mbps by December 2001.
We believe that we will differentiate ourselves in this market because of
the quality of our offerings, supported by excellent technology and
infrastructure. We have introduced a large number of innovations for both
our retail and corporate clients. For corporate customers, we introduced
Virtual Private Networks, VMAIL and an enterprise communication system
called ALICE. For our retail customers, we have expanded our distribution
channels substantially and reduced rates for Internet access. We also
allowed online registration for Internet accounts, online credit card
payments, global access to accounts, a package to prevent unauthorised
access to accounts and many other initiatives. I would like to point out
that these world-class innovations were developed entirely in-house. We
will continue to innovate with new products and services to offer the best
value to all customers.
TV up-linking
In addition to Internet services, we are expanding many of our other
existing business lines. For example, since October 1998, VSNL has provided
TV up-linking facilities to a dozen regional channels. Since the Indian
government liberalised its up-linking policy last year by allowing all
satellite channels to up-link from India, VSNL plans to take advantage of
liberalisation to grow this business.
NEW BUSINESSES
We are also examining opportunities in brand new businesses. When choosing
a new business, we look for a synergistic area that will allow us to
leverage our existing infrastructure and expertise, as well as for a high-
potential market with room for growth. Thus, all new businesses should help
us maintain our leadership. Accordingly, we have zoomed in on domestic long
distance services and direct-to-home services as well as international
telecom opportunities, for a special thrust. Let me discuss each of these
briefly.
Domestic long distance
The Indian government recently opened up the domestic long-distance
business to competition. As part of the compensation package for the early
termination of VSNL`s international telephony monopoly, the government has
agreed to give VSNL a DLD licence. We will also receive financial benefits
such as a five-year reimbursement for license, entry and revenue sharing
fees and exemptions from a performance bank guarantee.
By extending backwards from our international long-distance business into
the DLD business, we will reap a number of synergistic benefits. For
example, we will be able to retain a better share of revenues on the
domestic leg of international calls and will have lower reliance on BSNL
for domestic connectivity. We plan to position ourselves as a wholesale DLD
service provider with a national network and retain the DLD segment of all
international traffic.
Direct-to-home
The government has also permitted Direct-to-Home (DTH) TV services in Ku
band in India. This will allow TV signals to be distributed via satellite
directly to a viewer`s home. We see this area as the diversification into
broadcasting and at the same time utilising VSNL synergies in existing TV
uplinking, operation & maintenance of Ku band earth stations and management
of residential internet customers. Once we receive a positive report on
financial viability, we propose to initiate required actions to provide the
combined DTH and interactive services on a neutral up-linking platform.
International telecom initiatives
Your company intends to become a global player by extending its expertise
internationally. We are exploring opportunities in basic and cellular
telephony in select overseas markets. We have already signed one joint
venture agreement with MTNL, Telecommunications Consultants India Ltd.
(TCIL) and Nepal 5
Ventures Private Limited, to offer basic services in Nepal based on
wireless-in-local- loop technology. This joint venture, named United
Telecom Limited is also allowed to operate national and international long
distance telephone services. This year, the company will install a WLL
network for 55,000 subscribers in Nepal`s top 10 cities which will be
expanded to 5 lakh subscribers in 10 years time frame.
INVESTING IN INFRASTRUCTURE
To support all these initiatives in basic telephony, value added services
and new business areas, we will continue to invest in infrastructure. VSNL
expects to spend approximately Rs. 20 billion during the current financial
year out of the capital outlay of Rs. 59.12 billion for the five year
period ending March, 2002. Briefly, our plans include increasing the number
of international circuits; increasing bandwidth; continuing our investments
in satellite transmission capacity and undersea fibre optic cables;
creating high capacity cyber ports for hosting and connectivity services;
and building a low-cost, fully-integrated digital network across the
country with asynchronous transfer mode (ATM) switches, to allow better
transmission of voice and broadband data traffic.
CAPITAL MARKET DEVELOPMENTS
When your company`s American depository receipts began trading on the New
York Stock Exchange on August 15, 2000, we made history by becoming the
first Indian public sector unit (PSU) to list on any US stock exchange.
VSNL had already completed the largest PSU GDR programme in 1997, with
37.80 million GDRs. As I have already mentioned, the government has now
decided to sell divest 25% stake in VSNL to a strategic investor.
FUTURE OUTLOOK
The Indian telecom industry is benefiting from swift de-regulation, new
business opportunities and high growth rates in almost every service
segment. We expect that the penetration of all types of telecom services
will improve 6 substantially and that the demand for value added services
will rise fast. The new telecom policy expects 125 million new lines to be
added by the year 2010. According to all estimates, Internet usage and e-
commerce will multiply rapidly. Additionally, exciting new opportunities
will arise in various areas, including 3G services, wireless, mobile
satellite services and broadcast services. I believe that VSNL will benefit
enormously from these developments and is in an ideal position to seize new
opportunities as they arise.
CONCLUSION
In conclusion, I want to personally thank every member of the VSNL team for
his or her contribution and commitment. They are the real key to keeping
VSNL in its position as India`s premier telecommunications company. I would
also like to thank the members of our board for their energy and their
strategic support. As directors, S/ S. Subodh Bhargava, Ashok Wadhwa, N. R.
Narayana Murthy, H. P. Wagle, B. R. Khurana, Smt. S. A Tirmizi, C. V.
Rajan, and Smt. Sadhana Dikshit have generously contributed both their time
and their perspectives to VSNL and the company has benefited tremendously.
I would also wish to record my gratitude for the help, guidance and support
extended to VSNL by the Telecom Commission and its chairman, Mr. Shyamal
Ghosh, in particular.
S. K. Gupta
Chairman and Managing Director |