The Telegraph
Since 1st March, 1999
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Tariff tumble bites into profits

Mumbai, Oct. 21: Videsh Sanchar Nigam (VSNL) has announced a 33.27 per cent decline in its net profit for the quarter ended September 30 at Rs 245.9 crore against Rs 368.5 crore in the corresponding period last year.

The declaration, however, came with a bleak warning — the numbers could worsen when the impact of agreements with domestic carriers and Trai’s decision on the issue is taken into account, a VSNL release said.

The profit plunge was blamed on lower margins and slowing other income. Total income declined 25.23 per cent to Rs 1,304.1 crore from Rs 1,744.2 crore in July-September 2001, the company said. Other income declined substantially to Rs 56.3 crore from Rs 148.8 crore.

Company managing director S. K. Gupta said the results reflected tumbling tariffs, sliding settlement rates from international carriers and the impact of international long distance (ILD) competition to select destinations.

After agreements on revenue-sharing and interconnectivity with domestic carriers are reached, and a decision of the Telecom Regulatory Authority of India factored in, the figures would be adjusted accordingly.

“Once final agreements with major domestic telecom operators for revenue sharing and interconnect deals for ILD voice telecom services are clinched, these would have to be accounted for. So far, the ratio of revenue sharing used to compile numbers for the second quarter are based on those of April-June 2002 and the financial year ended March 2002,” VSNL said.

Even as negotiations to arrive at a mutually acceptable revenue share/interconnect arrangement continue, Trai has been asked to intervene to facilitate effective, equitable and efficient deal by setting a cost-based revenue sharing formula with domestic carriers.

On concerns expressed in some quarters about the risk of recovering dues from fallen telecom giant WorldCom, the VSNL chief said: “We have been receiving payments from international carriers, including WorldCom on a regular basis and no irregularities in the existing payment cycles have been observed.”

He attributed the decline in other income to reduced foreign exchange earnings and lower interest income.

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