Financial Daily from THE HINDU group of publications
Friday, Jul 12, 2002
Info-Tech - Telecommunications
Calls to come cheap as VSNL gears for rate cut
NEW DELHI, July 11
THE consumer can finally reap the benefits of competition in the international long distance (ILD) sector, with the incumbent operator, Videsh Sanchar Nigam Ltd (VSNL), all set to lower its tariff rates in the next couple of days.
The proposed new tariff structure, submitted to the Telecom Regulatory Authority of India (TRAI) for approval, is expected to match that of Bharti's and would effectively bring down the present call rates by up to 40 per cent.
According to the TRAI's recent regulation, service providers are barred from making public their tariff structures until it is cleared by the Authority. As such, no confirmation on the exact decline in rates could be obtained from the company.
This would be the second rate cut that VSNL would be resorting to this year. Starting April 1, the incumbent operator had slashed its tariffs by between 14 and 17 per cent, as mandated by the TRAI in the third tranche of tariff rebalancing announced in March. The Authority had stipulated new ceilings on the international call tariffs levied by the ILD operator(s), depending on the region to which the call is made.
VSNL did not make an issue of it, expecting that it would have to bring the rates down even further once the private operators start services in the newly opened up sector. While Bharti, Reliance and Data Access were amongst the first to bag the ILD licences, they could not start services pending security clearances.
Although Bharti announced its new tariff structure for ISD calls in end-April, which was up to 40 per cent lower than that of VSNL, it could not offer them to the consumers. As a result, VSNL held back its tariff cuts, wishing to capitalise on its monopoly status.
With the Home Ministry now giving security clearances to Bharti for ILD operations, VSNL decided to get into the act and has submitted its matching proposals to the TRAI.According to analysts, this is just the beginning of a series of rate cuts that will follow. Unlike the national long distance (NLD) sector, which saw a similar price war between Bharti and Bharat Sanchar Nigam Ltd (BSNL), the ILD operators have the flexibility to slash the rates even further.
To top it, there are quite a few players with a lot of financial muscle, including BSNL and Mahanagar Telephone Nigam Ltd, who have expressed their interest to enter the fray.
Reliance Communications, which already has an ILD licence, is also due to start its operations in a couple of months. So further tariff cuts are but expected. For the consumer, the party has only begun.
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