Government of India
                           Ministry of Communications
                         Department of Telecom Services
                        Sanchar Bhawan, New Delhi - 11001

No. 37-21/2000-OC                                           Dated 7/9/2000

To    The Chairman & Managing Director
      Videsh Sanchar Nigam Limited
      Lokmanya Videsh Sanchar Bhawan
      Kashinath Dhuru Marg,
      Opposite Kirti College,

      Prabhadevi,
      Mumbai - 400 028

             Sub: - Preponing of demonopolisation of Videsh Sanchar Nigam Ltd.

Sir,

     I am  directed  to inform  you that Govt.  had  decided  that the  monopoly
granted to Videsh  Sanchar  Nigam  Ltd.  in the  matter of  International  Voice
Traffic shall  terminate on 31/3/2002.  This may be treated as an advance notice
as required under the  provisions of para 5 of licence  granted to VSNL vide DoT
No. 220-5/98-PHC dt. 22/1/99.

2.0 In lieu of likely losses on account of preponement of demonopolisation,  the
following compensatory package has been proposed:

(i)  VSNL would be granted licence to run national long distance services.

(ii) VSNL would be liable to pay the licence  fee,  both by way of entry fee and
     revenue share for operating national long distance services and would be on
     the same footing like other private  sector  operators  but the  Government
     would pay a sum equivalent to entry fee and annual revenue share as licence
     fee,  net of taxes for a period of 5 years with effect from April 2001.  In
     addition, Government will not insist upon performance bank guarantee of Rs.
     400 crores so long VSNL retains PSU character.

(iii) VSNL would be granted Category - A ISP license.

     VSNL  may  place  this  compensation  package  in  lieu of  preponement  of
demonopolisation  before  the  shareholders  in a  general  body  meeting  to be
convened at the earliest and obtain its approval to enable further action in the
matter.

                                          Yours faithfully,


                                                      18/7/2000
                                          (V. Sampath Kamar)
                                                Director (SU)
                                                Tel:  3310217