VSL's Worth More Than Sum of Its Parts

Like Mahanagar Telephone Nigam (MTE - commentary - Cramer's Take), which I wrote about Friday, Videsh Sanchar Nigam (VSL - commentary - Cramer's Take) is an Indian telco that also trades here in the U.S. -- and looks like an excellent way to bet on the exploding growth in India's telecom market.

Unlike MTE, however, VSL's wireline business isn't in decline (far from it) and has a wide range of assets. Some are hard to value, and therein lies the bulk of this opportunity: I believe several of its assets are undervalued.

First, some history: Prior to 2002, VSL was India's monopoly international long-distance (ILD) services provider. In March 2002, private Indian conglomerate Tata Group bought a majority stake in VSL from the government of India. The company currently carries 3 billion minutes of voice and around 14G of data traffic over its wires out of India every year, which accounts for 60% of the domestic market.

The company should be able to maintain a 50% share in the Indian ILD market for years to come despite the entry of newer players mainly due to its excellent network capacity. Indians are placing more and more overseas calls as rates come down.

VSL bills itself as a "global communications company that offers voice and data services to enterprises, carriers and retail consumers all over the world." As the company says on its site, VSL provides wholesale international voices services, and through it submarine cable networks can provide data transmission and voice capabilities all over the world. The company currently owns a global transmission network of approximately 200,000 route kilometers and IP (Internet protocol) network with 200 POPs (points of presence). The company has offices in 35 countries and its customer base includes 1,500 global carriers, 450 mobile operators, 10,000 corporate clients, 500,000 broadband and Internet subscribers and 300 Wi-Fi public hotspots. VSL is headquartered in Bombay.

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At the time of publication, Somaney had no positions in any of the stocks mentioned in this column, although positions may change at any time without notice.

Jay Somaney is a partner and fund manager with TSG Capital Partners, a hedge fund based in Plano, Texas, and founder of GlobalTechStocks.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Somaney appreciates your feedback; click here to send him an email.