Tata-owned Videsh Sanchar Nigam Limited (VSNL) will shift its focus by building new business areas in the wake of falling margins in its core area of operations — providing international long distance (ILD) services. At the company’s seventeenth annual general meeting (AGM), VSNL chairman Ratan Tata emphasised that the ILD business as a stand-alone proposition was not viable.s

"The circumstances today are very different from what it was last year. We have to now address a new market for the ILD business," said 

Mr Tata. VSNL’s turnover and profits have dropped significantly over the last one year which has been attributed to falling ILD tariffs apart from the entry of private players like Bharti and Data Access in the segment. VSNL is expected to focus on the corporate and retail segments of its businesses in a big way. This includes areas such as national long distance (NLD), VPN (virtual private network), Internet-related services and Internet telephony.

It may be recalled that the Tatas acquired a 25 per cent stake in VSNL from the government in February last year. As part of the acquisition pact, the two state-owned telecom entities — Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) — were committed to routing their traffic on VSNL’s network for a two-year period up to March 31, 2004. Mr Tata said that VSNL has approached the government with two proposals post the termination of this agreement. "We have offered our infrastructure to BSNL which will save them the trouble of creating it from scratch. The other option is to outsource their business on a captive basis," he explained. These proposals have been made by VSNL to the government and is under consideration.

Pointing out that the company would face new challenges in the coming years, Mr Tata maintained that it was necessary to build new businesses and new customer bases.

"Our strengths are a trained workforce and the fact that we are not flabby," he said. VSNL has recently concluded its Voluntary Retirement Scheme (VRS) which has reduced its workforce by about 1,000 employees. The total cost of this exercise was Rs 94 crore.

The government today holds 26 per cent in VSNL and has expressed its desire to divest its stake in companies which have been privatised. When asked whether the Tatas might be open to acquiring the government’s remaining stake in VSNL, Mr Tata replied in the affirmative.

Company director (operations) N Srinath said that the NLD backbone would be completed by the end of this year. "NLD operations will be an important area for us," he added.