Videsh Sanchar Nigam Ltd.

India’s largest ISP is feeling the revenue crunch. Though VSNL garnered a net profit of Rs 400.2 crore during the quarter which ended in December, it is not likely to have come from Internet services. Internet services accounted for just Rs 84.4 crore of the total 2,062 crore revenue. Though the subscriber base, by the end of the year, grew rapidly to 557,245 from 507,353, VSNL competed with MTNL to cut down Internet tariffs. While leased line rates were reduced by seventy five percent, dial-up rates have been slashed by fifty percent. While the effects of cutting dial-up rates are not revealed, the massive cut in leased line rates has resulted in leased line revenue growing just 2.08 percent over the corresponding quarter revenues. The subscriber base is likely to ramp up rapidly with VSNL already on the way to becoming a national ISP, thereby compensating for the price cuts in both dial-up and leased line connections. VSNL’s long-term profitability in the Internet service business will clearly depend on how it develops value-added services over and above its plain vanilla connections.

Satyam Infoway

The nearest competitor in terms of revenue as well as subscriber base, has reported losses. Net loss for the quarter stood at Rs 86.1 crore as compared to the Rs 61.5 crore of the previous quarter. More than half of this is attributed to acquisition costs that the company is still bearing. What is significant is the other half of the loss. Though its corporate services, accounting for seventy four percent of SIFY’s sales revenue of Rs 47.2 crore for the third quarter, have more than compensated, the company still faces major challenges in its other operations. The major worry is mainly in its dial-up and portal businesses. In the dial-up business, Satyam has to balance the cost of acquiring more bandwidth for its operations and adding more subscribers to its network. Portal business still doesn’t contribute as much to top-line as it does to expenditure, with advertisement revenue dropping for the quarter. The loss is also attributed to the advertisement and marketing of its various services and the process of setting up its subsidiaries/affiliates (in IT enabled services, online education, B2B market place, etc.), most of which are in a ‘pre-revenue’ stage of growth.

Wipro Net

Wipro Net was almost in a similar boat. It spun off its consumer operations, Netcracker, into a separate company and tried to consolidate its positive corporate services. The corporate business already has 13,000 customers in twenty four locations and has brought in revenue of Rs 12.7 crore for the quarter ending in December. While Suresh Senapaty, chief finance officer, Wipro, convinces investors in a recent earnings call, "… because of this large customer base, we are able to get into an almost break-even kind of a cash flow over a period of time". The same kind of confidence is not perceived on its dial-up and portal operations, Netcracker, which is a 35,000-subscriber operation present in fifteen locations.

Pacific Internet

The Nasdaq listed Singapore-based ISP, which launched with fanfare in India, also seems to be cooling its heels as far as its operations here are concerned. At the end of the calendar year, in spite of having presence in cities like Mumbai, Delhi, Bangalore, Pune and Chennai, Pacific had just 10,449 dial-up and forty six dedicated (network ISDN and leased lines) subscribers. Not impressive for an ISP taken in the same breath as Satyam Infoway on the Nasdaq, just some time ago. Pacific’s broadband plans did not gather momentum, as its partnership plans with the Modis disintegrated. Also, according to the recent announcements made by the company, its proforma net loss of $6.8 million for the calendar year 2000, was mainly due to the operating costs associated with its expansion into India, apart from Thailand and Pacfusion.com operations.

Nareshchandra Laishram