A Volatile Hello

After VSNL lost its monopoly position in the International Long Distance (ILD), the sector has been witnessing a cut-throat price war. The slugfest looks set to intensify further, following Reliance Gateway’s acquisition of Flag Telecom, a global carrier of voice and data. The early signs are there for all to see. In what could be termed as an extraordinary Diwali bonanza, both landline and cellular operators have extensively slashed their ISD rates. And even state-run BSNL and MTNL, who are still under the lock-in period of routing their ILD traffic only through VSNL, have been no exceptions.

For its 40 million plus landline, as well as cellular and WLL subscribers, BSNL has slashed its ISD call rates to the US, the UK, Canada and other European countries by between 60% and 70% for a month between October 21 mid-night to November 21. MTNL too brings succor to Mumbai and Delhi subscribers by bringing down its ISD tariffs by nearly 40%.

Even Tata Teleservices, Bharti and other cellular operators have reduced tariffs by 40%-70% during the festive season.

But one can say with a fair degree of certainty, that even if the pre-October 21 rates are restored once the festive season gets over, ILD rates are bound to reduce further. Apart from Reliance’s acquisition of Flag, this could also be attributed to the end of the VSNL lock-in period in March 2004. Under the current scheme of things, of the Rs 24 per minute peak time ISD rate that BSNL charges the customer; it retains close to Rs 15 and gives Rs 9 to VSNL as interconnection charges. Of this amount, VSNL can retain only around Rs 2 and has to hand over the remaining portion to the foreign carriers for routing the call to the destination. BSNL can therefore, if it wants, choose to retain a lesser portion, and pass on the benefit to the customers. This is precisely what it is doing as a festive offer to its customers when it has reduced its tariff rates to Rs 7.20 per minute. The same is true for MTNL, and once both are not dependent on VSNL they can play around with its Rs 9 part.

With ILD traffic set to clock a growth of 21-35% in 2003-04, and with players like BSNL, MTNL and obviously Reliance set to join the fray, tariffs are expected to come down further because of the intense competition. With Flag landing in the Reliance kitty, VSNL is now left with only SAFE, SEA-ME-WE-3 and the old faithful SEA-ME-WE-2 on the submarine cable front. The challenge has been thrown to even Bharti’s i2i submarine cable network between Chennai and Singapore. 

A postscript: all these ILD players are virtually participants in a game of musical chairs with the invisible string being in the hands of TRAI in the background. TRAI’s two latest googlies: new IUC charges fixed at a rate of Rs.4.25 between all kinds of ILD services and its recommendation on access deficit charge (ACD). A combination of both of these would make ISD calls dearer by nearly 26%. 

Rajneesh De in Mumbai