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VSNL, MTNL to Float Internet Services Arms

India's telecom majors Videsh Sanchar Nigam Limited (VSNL) and Mahanagar Telephone Nigam Limited (MTNL) will each float separate, wholly-owned subsidiaries to handle Internet and related business soon.

While VSNL's VSNL Seamless Services Limited (VSSL) is all set to float within three months, MTNL's subsidiary, Millennium Telecom is expected to be operational in a couple of month's time.

The subsidiary of VSNL has been in the pipeline for the past three years. But an enabling resolution to this effect was approved at the company's annual general meeting recently. Though VSSL was set up last year as a shell company, it was waiting for a nod from its shareholders.

VSNL plans to shift its Internet services to the new entity first, other value added services like electronic data interchange (EDI) and e-commerce being moved to the new subsidiary subsequently.

However, there are no plans to move VSNL's gateway services to the new entity. The setting up of a subsidiary is of prime importance for VSNL as it is now up against tough competition to maintain its largest ISP status in India.

"Internet services are going to be driven by good marketing initiatives in addition to service hence it is imperative to have a team which focuses on these aspects," says VSNL source. Incidentally VSNL has nearly 300,000 account holders.

According to SK Gupta, the new chairman and managing director of VSNL, the company was planning to concentrate on building further its brand equity in Internet service. It will get into e-commerce as soon as the required cyber laws are passed, he added.

Meanwhile Millennium Telecom is expected to be operational by December this year. The company would have a paid up capital of $25 million, according to S Rajagopal, chairman and managing director of MTNL.