INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

ON LONG HAUL,MTNL TO DITCH BSNL

NLD Bids From All Players To Be Invited As Delhi-Mumbai Provider Feels Tariffs For Carrying Its Long-Distance Traffic Are Far Lower Than 65 Paise A Minute it Pays.

In a major setback to Bharat Sanchar Nigam Ltd (BSNL), sister concern Mahanagar Telephone Nigam Ltd (MTNL) is set to take away its Rs 900-crore national long distance (NLD) business from it. MTNL is inviting bids from all NLD players for carrying its long-distance traffic. The important players in the NLD segment are Bharti, Reliance, BSNL and VSNL.

Sources said MTNL is in the final stages of preparing the tender document for inviting expressions of interest (EOIs) from the telcos. The tender is expected to be floated by next week.

At present, BSNL is the NLD carrier for MTNL. Earlier, MTNL paid BSNL at the rate of Rs 1.20 per minute for carrying NLD traffic. Later, Trai revised the rates and put a ceiling of 65 paise per minute. MTNL, however, feels that the rates for carrying NLD traffic are much lower than 65 paise.

“We are hopeful of saving at least Rs 400-500 crore per annum by getting competitive bids through the tender process,” said RSP Sinha, chairman and managing director of MTNL.

BSNL's main advantage over its competitors is that it has a wide telecom network throughout the country. It is able to terminate STD calls even in remote areas. However, more than 95% of the calls that MTNL generates are terminated in cities and towns, where even other NLD players have networks. Therefore, it can carry 95% of the traffic through the lowest bidder. Rest 5% of the traffic can be passed on to BSNL at rates decided by TRAI.

MTNL is the incumbent telecom service provider in Delhi and Mumbai. It doesn't have its own NLD network. BSNL is the incumbent telecom service provider in rest of the country. It has a countrywide network for NLD services. The government has 100% holding in BSNL. In MTNL, the government has about 56% equity holding.