The Hindu Business Line : VSNL may look beyond ILD

THE earnings performance of Videsh Sanchar Nigam (VSNL) for the second quarter ended September 30, 2002 reflects a further deterioration in its financial position vis-à-vis the corresponding period of the previous year and on a sequential basis.

VSNL has recorded a 21.8 per cent decline in its income from operations at Rs 1,247.80 crore over the corresponding period of the previous year. Following a sharp fall in other income (on account of reduced foreign exchange earnings and lower interest income) and an increase in total expenditure (particularly of operating cost), the post-tax earnings have suffered a bigger blow, declining by 33 per cent at Rs 245.9 crore over the same period.

Even on a sequential (quarter-on-quarter) basis, income from operations and post-tax earnings declined by 9.1 per cent and 5.9 per cent respectively. The earnings performance has to be viewed in the light of the following:

The international long distance (ILD) telephony accounted for nearly 85 per cent of the operational revenues for the half year ended September 30, 2002. During the half- year, traffic volumes increased by 16 per cent over the same period in the previous year resulting from lower tariffs. But a sharp drop in settlement rates appears to have contributed to the decline in revenues from telephony services (segmental results) by 18.5 per cent over this period. Since the drop in settlement rates and ILD traffic minutes have not been specifically indicated by the company for the second quarter, we can only draw some inference from the first quarter performance. For the first quarter ended June 30, 2002, while the traffic volumes increased by 24 per cent, revised total accounting rates were about 30 per cent lower than the corresponding period of the previous year.

The company is still engaged in the process of negotiating revenue sharing /interconnect arrangements for international long distance telephony with major domestic telecom operators (such as Bharat Sanchar Nigam). In order to resolve this issue, it has also made a reference to the Telecom Regulatory Authority of India for intervention. Pending final agreement both income from operations (revenues) and transmission costs (included under Network costs under total expenditure) have been accounted for based on the same ratio of revenue sharing for the year ended March 2002. If the revenue sharing negotiations work against VSNL, it may have a significant impact on its earnings performance for the half year.

According to the company management, VSNL has tested the national long distance services in some cities and proposes to make significant investment in infrastructure in the next quarter. This will help VSNL diversify its portfolio of offerings.

In the first half of 2002-03, the company has recorded a marginal 1.31 per cent improvement in revenues from value added services (such as Internet, leased lines and frame relay) to Rs 385.3 crore. And value-added services, contributing around 16 per cent of its revenues, will be one of its focus areas of the future.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
BHEL bags contract from PowerGrid

Satyam Q2 results on Oct 23

Will green concerns seal Kudremukh mines? SC panel for 5-year lease extension

Estranged bedfellows

VSNL allowed to invest Rs 835 cr in Tata Tele

Nirmal Agro setting up canned pineapple plant

Escorts Heart centre at Jodhpur

Madura sees robust growth for suits

GM targets India as key market

Synthite Chemicals set to post Rs 20-cr net

Electronic Data bullish on PLM solutions

TVS Motors: Cost reduction, royalty savings versus marketing, R&D spends

Maruti loses 8 pc of market pie in 6 months

VSNL may look beyond ILD

N.R. Raje to take over as IOC R&D Director