Mumbai, March 19: Videsh Sanchar Nigam (VSNL) today snapped up DishnetDSL in a Rs 270-crore deal that gives its internet-access business an unrivalled edge.
In a bold gamble that goes a long way in fulfilling the Tatas’ telecom ambitions, 600 owned and franchised cyber cafes of Dishnet will move into the VSNL fold.
“The acquisition of Dishnet DSL will strategically help VSNL consolidate its presence in the internet access business under the Tata Indicom brand-name by enlarging its geographical footprint and giving it a head-start in broadband,” VSNL director (operations) . Srinath said.
VSNL has been reworking its strategy since players like Bharti Tele-Ventures and Data Access broke into international long distance telephony, an area in which enjoyed years of monopoly as a state-owned firm before the Tatas picked up a controlling stake.
It recently shovelled large amounts of cash into Tata Tele-services, a group firm offering basic telephone services, and then started looking at a boost in internet.
Today’s announcement that it signed a “slump-sale” agreement with Dishnet to take over its narrowband and broadband units for a consideration of Rs 270 crore is seen as a big leap on that road to growth.
Under the transaction, all assets, employees and customers of Dishnet’s internet service division will become a part of VSNL. The buyout will have to pass legal tests and go through other merger formalities, all of which should be completed before the close of the deal.
VSNL had the assets and liabilities of Dishnet evaluated by a reputed merchant banker before taking a decision. The acquisition brings to it a large pool of dial-up and broadband customers, spread across 38 cities and 200 towns. It also brings home a massive network of over 600 owned and franchised cybercafés run by Dishnet.
VSNL will now be in a position to offer dial-up services in 20 more locations, taking the total number of centres under it to 50. The broadband assets that come from Dishnet can cater to 50,000 customers in key cities.
With over 6,50,000 dial-up ISP subscribers and the largest market-share in corporate net access, VSNL was keen to make a big entry into broadband Web business. The buyout has brought that goal within reach.
“The divestment is in line with our group’s strategy of focusing on wireless communications. In the past five years, Dishnet has played a major role in contributing to increase internet penetration in India, its name becoming synonymous with broadband Internet,” Dishnet chief executive officer V. Srinivasan said.
The Tatas have set about rapidly expanding their retail and corporate customers in telecom through the Tata Indicom brand, which extends to dial-up internet, net telephony, calling cards and a variety of other businesses. The priority now is to consolidate the presence in internet by riding on broadband initiatives.
As its grows at home, VSNL is expanding its global presence too, setting up operations in Sri Lanka, Singapore and the US. Its shares are listed in India, while its ADRs are traded on the New York Stock Exchange.