(10 May 2006 11:30 pm)

MUMBAI: Videsh Sanchar Nigam Ltd (VSNL) is on a shopping spree. The telecommunications giant has bought out the internet business of 7 Star, a major cable network in Mumbai.

The deal gathers significance as it allows VSNL last mile access and offers an expansion route through cable operators. Telecom operators like Reliance Infocomm and Bharti have been eyeing the retail broadband market but been unable to see rapid growth.

Though the acquisition price could not be confirmed, market speculation is that VSNL has paid around Rs 70-80 million. The cable TV operations are outside the deal. 7 Star runs cable TV operations in the western suburbs of Mumbai and offers cable internet through LAN (local area network) connections.

"We have acquired the internet business of the 7 Star group—Sevenstar.com. We cannot disclose further details due to confidentiality reasons. We continuously evaluate options for growing our presence in the internet and broadband space," confirms a VSNL spokesperson. 7 Star promoters were not willing to comment on the deal.

The cable internet subscribers of 7 Star will be migrated to the Tata Indicom Broadband brand over a period of time. "7 Star will continue to assist us in managing the customers," says the VSNL spokesperson.

Analysts say VSNL was willing to pay a higher price because 7 Star was almost a monopoly internet player in the area where it was servicing cable TV operations. The stretch included the western belt of Andheri and Santa Cruz in Mumbai.

VSNL has tied up with around 2000 cable operators across the country to overcome the problem of last mile connectivity. VSNL executive director N Srinath had earlier said allying with operators and sharing their network was one of the best options the company had.

For strengthening its broadband presence in the Small and Medium Enterprises (SME) segment, VSNL on Monday announced it had entered into an agreement to buy out Direct Internet Ltd (DIL) and its wholly owned subsidiary Primus Telecommunications India Ltd (PTIL) for Rs 750 million. While DIL will focus entirely on the SME segment, the retail customers are likely to be rehomed in VSNL. The earlier acquisitions of VSNL included DishnetDSL for Rs 2.7 billion and Tata Power broadband for Rs 2.39 billion which gave it broadband subscribers in the retail as well as the SME segments.

Is VSNL looking at tie ups with cable operators for IPTV service as well? "VSNL currently is providing broadband and content services, in conjunction with cable operators. The company will continue to look at offering various value added services that is of mutual benefit to VSNL and the cable operators," says the spokesperson. Reliance Infocomm, Bharti and other telecom operators have plans to rollout IPTV but have been unable to resolve the last mile connectivity.