The international long distance (ILD) business in India defied the thumb rule that an increase in the number of players leads to market expansion. The industry, which had a size of Rs 6,854 crore in FY 2001–02, shrunk to around Rs 5,444.86 crore in FY 2002–03, as three new players Data Access, Bharti Telesonic and Reliance Infocomm entered the market. Thus, in terms of revenues, ILD services witnessed a negative growth of 20.5 percent, thanks to tariff drops on regular intervals and a significant reduction in settlement rates due to increased competition.

VSNL, the incumbent operator, retained the No. 1 position with a market share of around 83.8 percent. The company netted a total turnover of Rs 4,562.5 crore. On the other hand, Data Access sprung a surprise and left Bharti behind to grab the No. 2 slot with 10.7 percent market share. Bharti wasn’t able to leverage its leadership in ILD services and had to be content with the No. 3 slot and a market share of around 5.5 percent.

However, the decrease in ILD tariff by the new and incumbent service providers helped boost the traffic upwards by around 19 percent. In FY 2002–03, the total international traffic was pegged at 3,700 million minutes, up from 3,120 million minutes in FY 2001–02. According to VOICE&DATA estimates, incoming ILD traffic was around 2,900 million minutes whereas outgoing traffic was around 800 million minutes. In terms of outgoing traffic, FY 2002–03 witnessed a high growth of around 36 percent whereas in terms of incoming traffic the growth was relatively low at 14.5 percent. Incoming still dominated, even though the incoming versus outgoing ratio, which was 4.31 in the last to last fiscal, was reduced to 3.62 in the last fiscal.

In terms of incoming traffic, the US was the preferred destination, followed by the UAE, the UK, Saudi Arabia, and Canada. Top 5 destinations accounted for more than 80 percent of the total incoming traffic. In terms of outgoing traffic, Saudi Arabia was the preferred destination, followed by the US, the UAE, the UK, and Singapore. Top 5 destinations accounted for around 55 percent of the total outgoing traffic.

VoIP has been moving at a fast pace in India. In FY 2002–03, of the total traffic, around 8 percent was estimated to be VoIP traffic. This translated to around 296 million minutes. The percentage of VoIP is expected to increase to 16–20 percent in FY 2003–04, with more and more service providers opting for it.

The reduction in tariffs also led to a decrease in gray market traffic. Tariff was initially reduced by 16 to 20 percent and again by 40 percent in July. At present, the gray market stands at around 1.5 billion minutes, which is unaccounted for in our estimation of the market (revenue and traffic). It is estimated that a loss of around Rs 1,500 crore was incurred last year due to the gray market.

The international connectivity market, which includes IPLC, Frame Relay, and IP VPN services, was about Rs 401.4 crore in FY 2002–03, as against Rs 358.4 crore in the previous fiscal—a growth of around 12 percent. Now with the incumbent as well as new operators focusing more on international connectivity, it is expected that the market will grow by around 40 percent in FY 2003–04. IPLC is still the largest revenue earner in international data connectivity and has shown an excellent growth, thanks to the BPO boom.

The Players
Data Access and Bharti Telesonic launched their operations in July 2002. Reliance Infocomm too quietly launched its operations in a limited manner, while BSNL is yet to launch its ILD services. Both Data Access and Bharti Telesonic had a tough time getting security clearance. In FY 2002–03, both service providers focussed on voice, while this year the focus is data services.

Top ILD (Voice) Service Providers
	Company	Traffic in (mn minutes)
1.	VSNL	3,000
2.	Data Access	470
3.	Bharti Telesonic	230
	Total	3,700
V&D estimates CyberMedia Research

Tata increased its stake in VSNL to around 45 percent and still had the exclusive right for BSNL and MTNL traffic. The company, coming out from the monopoly status, had a market share of around 84 percent. In its latest announcement, VSNL is planning to keep its customer base intact and has announced setting up of the Tata Indicom Enterprise Business Unit (TEBU), a focused sales and marketing team that will undertake specialized business development activities. The unit is a combined initiative of VSNL, Tata Teleservices, Tata Teleservices (Maharashtra) and Tata Internet. TEBU will provide total solutions to corporates by piggy backing on the Tata Group. This will hold back VSNL customers who were showing the tendency to switch over to new private operators for their international voice and data needs. Recently, VSNL has entered into a strategic tie-up with Gemplex to offer customized IP-based international virtual private network services to corporate customers in India. While its IPLC customer base registration increased from 11,000 in 2001–02 to 36,000 in 2002–03, the IP-VPN customer list is expected to grow by a similar magnitude this year.

With VSNL revenues dipping with the passage of time, the company is looking for greener pastures. It is foraying into new foreign markets and has opted for an external gateway operator license in Sri Lanka.

Total = Rs 7,181.50 crore	Total = Rs 6,304.20 crore
	Others include Inmarsat satellite mobile telecommunications, EDI, managed data network services, video conferencing, TV relay services, packet switch data transmission.
Total = Rs 5,170.86 crore
V&D estimates CyberMedia Research

Data Access, a joint venture between Spa Enterprises and PCCW is moving at a fast speed and has netted a turnover of Rs 584 crore. At present, it is carrying around 25–30 percent of India’s incoming ILD traffic and is giving a good fight to the established incumbent player VSNL through its IP backbone. At a time when most of the operators were banking on the traditional TDM technology, Data Access made a bold decision and opted for IP which helped the company take a giant leap and also have economies of scale that were difficult to match. The cheaper price is due to the excellent network architecture that’s flexible and has a high level of redundancy. The company has entered into a strategic partnership with HECL whereby the latter will market Data Access’s complete basket of international carrier services.

Data Access is also focusing on global clearinghouse operations and has switches placed in India, the UK, the US, and Hong Kong. The company has also got the license to offer services in the developed US market, and is the first Indian company to get it. It has also opted for the external gateway operator license in Sri Lanka and is eyeing for ILD operations in Bangladesh, Saudi Arabia, Iran, Iraq, and the UAE along with local partners as and when these markets open up.

Bharti Group has merged its long distance, access, and data operations and formed Bharti Infotel. Long distance (ILD as well as DLD) forms around 60 percent of Infotel’s revenues. Recently, Bharti Telesonic received security clearance to offer IPLC services and has been moving at a fast pace in acquiring large customers. This has enabled the company to offer high-speed capacity leased circuits for integrated applications like voice, data, and video to anywhere in the world. The company also offers submarine bandwidth through Network i2i, a JV of Bharti Group and SingTel. The submarine cable link is between Chennai and Singapore.

Reliance Infocomm has also launched its ILD operations. The company has already installed PoPs in New York and Los Angeles and secured international connectivity using Flag’s undersea cable bandwidth through VSNL and satellite bandwidth through New Skies. The company has plans for satellite gateways in Delhi and Kolkata and ILD gateways and TDM switches in Delhi, Kolkata, Chennai, Ernakulam, and Mumbai.

BSNL has got an ILD license and plans to start incoming calls in the months of August–September and outgoing calls after March 2004 once the two-year lock-in period is over. During the privatization process, the government had provided the lock-in period to VSNL for routing ILD traffic of BSNL and MTNL. BSNL can also opt for being dependent on VSNL for all its ILD operations.

It is forecasted that ILD traffic will be in the range of 4.5–5 billion minutes in FY 2003–04, to clock a growth of 21–35 percent.

Pravin Prashant