The Tata-controlled Videsh Sanchar Nigam Ltd has offered to sell its international long-distance infrastructure to Bharat Sanchar Nigam Ltd.

According to a proposal submitted by the Tata group to the communications ministry, VSNL will lease out bandwidth from BSNL for routing its own traffic after the sale.

Tata group executives told Business Standard that the Tatas had never objected to BSNL's entry into the international long-distance services segment.

"We have made two offers to the government. One, BSNL leases lines from VSNL for its international long-distance business. Two, BSNL buys out VSNL's infrastructure, with the latter leasing capacity from BSNL for its international long-distance traffic," an executive said.

With the government opening up the international long-distance segment in 2002, VSNL's marketshare is dwindling. To make matters worse, the government also gave a licence to BSNL.

If BSNL puts in place its own international long-distance network, it will be a blow to VSNL because over 90 per cent of its traffic comes from BSNL's 40 million fixed-line subscribers.

While negotiations between the two companies have been on for over a year, progress is slow. There was a stalemate over the revenue-sharing issue since private operators like Data Access and Bharti Telesonic had offered better rates than VSNL for routing traffic.

Tata group executives said the objective was to prevent duplication of infrastructure. "What is the point of having two identical networks for the same purpose? If BSNL has a problem in leasing out lines from VSNL, then we can lease them from BSNL," one of them pointed out.

They further clarified that the Tatas had never wanted to sell back VSNL's international long-distance business to the government.

The agreement with BSNL to route traffic was for two years, and ends in March 2004. The proposal was being discussed with the government and BSNL, they said.

The VSNL offer assumes significance with indications from the communications ministry that BSNL may be forced to shelve its international long-distance plan.

Communications Minister Arun Shourie had said while BSNL's commercial interests would have to be protected, the viability of VSNL also needed to be kept in mind while taking a decision.

Meanwhile, BSNL executives said negotiations with VSNL were on. "We have time till early 2004 to decide what our international long-distance strategy will be like. It is too early to say what our options are since the market dynamics are changing fast," a BSNL executive said.

Long-distance equation

• 75% of VSNL's revenues come from ILD services
• VSNL is heavily dependent on BSNL's 40 million fixed-line subscribers
• The BSNL-VSNL agreement for routing ILD calls comes to an end in March 2004
• BSNL has plans for its own ILD service post-March; VSNL dependent on partnership for survival