The Tatas have warned that group company, Videsh Sanchar Nigam, will be adversely affected under the proposed unified licencing regime.

In a recent presentation to the Telecom Regulatory Authority of India, senior group executives said its international long distance revenues will be hit under the proposed regime with GSM (Global System for Mobile Communication) operators lobbying for ILD connectivity sans licence fee.

This is similar to fixed line service operators, which were allowed to operate limited mobility without paying licence fee or spectrum charges.

ILD services remain VSNL's largest business line, accounting for about 82 per cent of total traffic revenue in 2002-03.

However, its revenues have been falling with the government allowing private players in ILD since April 2002 and sharp decline (50 per cent drop) in international call tariff.

Moreover, the settlement rates for incoming ILD tariff fell, reducing retention per minute for incoming traffic.

Considering the sharp decline in revenues from ILD business with Bharat Sanchar Nigam and Mahanagar Telephone Nigam no longer expected to prefer VSNL to route its ILD traffic from 2004, VSNL has been forced to shift its business focus to new businesses.

Recently, at an annual general meeting, VSNL's chairman Ratan N Tata, told shareholders that, "We have to build another business as ILD will be gone by next year".

A senior Tata group executive claimed that the company has only suggested options wherein the existing operator will have the choice to migrate to unified licensing regime in existing circles or opt for a pan-India unified licence.

Association of Basic Telecom Operators, in a response to Trai's consultation paper on unified license, had suggested that the licence should have basic, cellular, long distance (national an international) and Internet services under one umbrella.

However, the presentation points out that the GSM operators may ask Trai to adjust the Rs 500 crore (Rs 5 billion) NLD entry fee from their GSM licence fee.

This will allow GSM operators to seek direct inter-circle MSC-2 MSC connectivity resulting in bypassing the NLD carrier.

Alternatively, GSM operators will also seek and use their own NLD bridges, which will result in tariff wars and squeeze NLD revenues.