According to the agreement, VSNL has provided 100 megabit of Ethernet link to Yahoo! India, which has recently entered the domestic market with a big bang. Yahoo! India will pay for the bandwidth, in addition to the hosting charges, to the state-run VSNL.

Industry sources indicate that the competition among server-hosting firms was rife to host the Yahoo! servers. Considering the size of Yahoo! India, one of the global leaders in e-commerce arena, the agreement with the US-based company is a major achievement for VSNL.

VSNL director (operations) Amitabh Kumar told eFE that the company was also in talks with other major dot.coms to host their servers in India. VSNL is also setting up server capacities in Pune and Vashi (New Mumbai). This is in addition to the present facilities available in Mumbai and New Delhi, Kumar added. VSNL had signed up with many major dot.coms and companies including Microsoft to host their servers.

Kumar said the company's new initiative - Monsoon Magic - to garner more Net customers had resulted in a subscriber-base of over 4.10 lakh. The Monsoon Magic has helped VSNL add an additional 1.25 lakh users within the first 40 days of the new campaign. VSNL had announced a 50 per cent cut in the Internet rate for a period of two months from June 1 to July 31.

The company is also set to increase the total bandwidth capacity to about 800 megabit within the next three months from the present 300 megabit. To achieve this, VSNL will be spending about Rs 350 crore. "The addition of 500 megabit will lead into an excess capacity in India," Kumar said.

VSNL will hike the bandwidth capacity by 155 megabit each via cable touching Mumbai and Kochi and another 200 megabit via satellite. Kumar said the company's American Depositary Receipts (ADS) listing on the New York Stock Exchange (NYSE) would happen this month. VSNL is also firming up its plans to hive off its Internet division as a wholly-owned subsidiary called Videsh Seamless Nigam Ltd (VSSL) shortly.