IndiaPost.com - VSNL set to transfer retail Internet business

MUMBAI: Videsh Sanchar Nigam (VSNL) will hive off its retail Internet business unit into a subsidiary to simplify the holding structure and to allow for possible unlocking of value in future. The company's shareholders approved the spin-off at the annual general meeting (AGM) in Mumbai. During the last fiscal, VSNL had acquired broadband services provider Direct Internet (DIL) and its wholly-owned subsidiary Primus

Telecommunications India, now called VSNL Internet Services (VISL). "A comprehensive scheme of arrangement for transfer of the retail business undertakings of VSNL to VISL and the amalgamation of DIL with VISL has been filed with the high courts," VSNL chairman Subodh Bhargava said at the AGM. VSNL is also undertaking organizational restructuring to become a global, multi-business telecom player.

The company is tightening corporate identity and branding as part of measures to have a global business structure. It is also pruning the number of subsidiaries from more than 50 to 30, managing director N Srinath said.

He said most of these firms came under the VSNL fold through the acquisition of submarine cables, Tyco Global Networks (TGN) and Teleglobe, and were formed to comply with local laws stipulating the creation of country specific subsidiaries to hold the required licenses and assets. VSNL would strive to have just one entity in each country, he said.

The communications firm, which has already announced a capital expenditure of $500 million for this fiscal, is not looking at acquisitions for now. "There is no big inorganic component to it," said Mr Srinath. Mr Bhargava said the company's profit margins in wholesale voice business were under pressure and there was a need to increase volumes and reduce costs to counter the challenge. "Salaries and increase in salaries for retaining talent is another challenge," he said.

The VSNL group had 4,401 employees at March-end, of which 1,200 were based outside India. VSNL's broadband business doubled last year. To address the challenge of last mile connectivity between the service provider and the customer, VSNL is rolling out its own broadband wireless networks based on WiMax technology. This will do away with the need to have cable to reach the customers.