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The Videsh Sanchar Nigam Limited is buying additional capacity of 300 MBPS on three trans-Atlantic cables. This extra bandwidth on the TAT 14, AC1 and Gemini cables would cost it $100 million.

The investment will give VSNL access to the lucrative US and European markets.

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Amitabh Kumar, acting chairperson and managing director of VSNL, has been quoted as saying that the acquisition will be funded through internal accruals.

The move is aimed at establishing 'points of presence' in Europe and US. The PoPs will be for both telephony and Internet.

As far as the US is concerned, VSNL will have to go in for a joint venture with a local US carrier. The country's telecom regulations do not allow a foreign telecom company to operate below its set benchmark accounting rates.

Kumar says "The US is the most restrictive market. The rates laid down by the Federal Communications Commission are not viable."

Internet traffic is growing faster than telephony traffic. For instance, in 1993, Australia had a total telephony bandwidth of around 400 MBPS when the Internet started becoming popular. In 1998, the total telephony bandwidth in Australia was around 500 MBPS, while the Internet bandwidth has already touched 700 MBPS.

VSNL has also identified Middle East, Africa and South East Asia as priority areas for its new business. VSNL has invested $50 million to buy capacity in SAFE cable, which gives it access to nearly 14 countries in the Middle East and South Africa.

The intention is to venture into the African continent to offer long-distance telephony and other value-added services.

As for the extremely competitive Southeast Asian markets, VSNL is not averse to picking up equity through the private placement route. And, in order to act quickly, the board of VSNL has been empowered to take decisions on investments below Rs 1 billion.

Moreover, VSNL is not expected to face any problem in funding its projects. The company expects to close the current financial year with a profit figure in the Rs 12-13 billion range, and has no debt on its balance sheet.

The expansion plans are in addition to VSNL's $1.4 billion Ninth Five-Year Plan. In the current plan, which will extend to 2002, VSNL is planning to spend nearly $564 million for expanding its transmission networks, while switching will account for $222.5 million.

It is also investing $352 million in new service platforms such as global multimedia satellite systems, mobile satellite services, Inmarsat and Intelsat, and value-added services and video facilities.

- Compiled from the Indian media

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