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AT&T Goes Long Distance in India

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News Analysis
Light Reading
10/11/2006
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AT&T Inc. (NYSE: T) has secured the first long distance licenses in India offered to a foreign carrier, even as the country’s government investigates it for illegally operating services there.

The operator set up AT&T Global Network Services India, a joint venture with Mahindra Air Services, in the spring to apply for national and international long-distance licenses. AT&T India plans to offer Virtual Private Network (VPN) services to the corporate enterprise segment by the end of the year. (See AT&T Granted India License.)

The U.S. carrier isn't the only international operator looking to break into a market populated by growing multinationals, IT services and software companies, and business process outsourcing (BPO) providers. British incumbent BT Group plc (NYSE: BT; London: BTA) has set up a local subsidiary to pursue licenses and acquisition opportunities. (See BT, AT&T Set Sights on India and BT Plans Further Global Push.)

Orange Business Services and Cable and Wireless plc (NYSE: CWP) have also expressed interest in entering the long distance market.

The Indian government has been doling out national and international licenses in a move to open up the market to competition, which has been dominated by four carriers -- Videsh Sanchar Nigam Ltd. (VSNL) (NYSE: VSL), Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance Communications Ltd. (RCom) , and Bharat Sanchar Nigam Ltd. (BSNL) . It has granted entry to domestic carriers Mahanagar Telephone Nigam Ltd. (MTNL) , Railtel Corporation of India Ltd. , and PowerGrid in recent months, and is evaluating applications from virtually every other operator -- including the likes of Spice Telecom and Idea Cellular Ltd.

But the decision to award licenses to carriers from abroad has been held up as the Indian government investigates charges that AT&T, BT, Orange Business Services (formerly Equant), and Verizon Communications Inc. (NYSE: VZ) (MCI) have been offering services illegally.

Foreign carriers have customarily signed agreements with VSNL, Bharti, and Reliance for access to their networks to offer services to corporate customers in India. (See C&W Partners With VSNL.) But according to the government, these partnerships -- which allow the foreign partner to bill customers directly -- mean that carriers are evading applicable service taxes and license fees.

With international carriers showing interest in entering the market, India’s Ministry of Communications is stepping up its investigation, issuing notices to all seven companies involved. It reportedly advised the Department of Telecom against granting AT&T's license request, but a screening committee has decided to treat the inquiries as separate from its application process.

— Nicole Willing, Reporter, Light Reading

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