EXHIBIT 4.5

                           MEMORANDUM OF UNDERSTANDING

                                     BETWEEN

                          VIDESH SANCHAR NIGAM LIMITED

                                       AND

                           MINISTRY OF COMMUNICATIONS

                        DEPARTMENT OF TELECOMMUNICATIONS

                             FOR THE YEAR 2001-2002



<PAGE>



                                    PREAMBLE

         Whereas the Government will provide  necessary and required support and
assistance, VSNL will be accountable for results and achievement of its targets.
This MOU is intended to support VSNL and make the  organisation  accountable  in
achieving  its  long-term  objectives  as well as  short-term  plans by  optimal
utilisation  of its  resources  and  enhancement  in the  level  of  operational
efficiency, productivity and other parameters of corporate performance.

         This MOU has the following Sections:

         SECTION I         MISSION, BROAD GOALS & OBJECTIVES

         SECTION II        COMMITMENTS OF VSNL FOR THE YEAR 2001-02

         SECTION III       DELEGATION OF POWERS

         SECTION IV        ASSISTANCE FROM THE GOVERNMENT

         SECTION V         FREQUENCY OF MONITORING AND INFORMATION FLOW

                                    * * * * *




                                                                               1
<PAGE>



                                   SECTION - I

                                     MISSION


                                    TO CREATE

                              A GLOBAL AND SEAMLESS

                             NETWORK OF INFORMATION

                                 SUPER HIGHWAYS;

                                   TO CONNECT

                              PEOPLE AND COMPUTERS

                                COST EFFECTIVELY

                                AND EFFICIENTLY;

                               ANYTIME, ANYWHERE.




                                                                               2
<PAGE>



                           BROAD GOALS AND OBJECTIVES

(1)     To plan and provide full range of telecommunications  services including
        Value Added  Services  like  Business  Network,  High Speed  Leased Line
        Services etc.,  from VSNL Gateways in India to all parts of the world to
        users at sea, on land and in air.



(2)     To develop sound marketing strategy with cost effective solutions.



(3)     To  seek, promote and foster excellence amongst  the work force, improve
        productivity, update human and machine capabilities.



(4)     To  continuously enhance quality of service and  to continue  to improve
        shareholder value.



(5)     To  actively  seek  expansion  of  company's  operations  through  joint
        ventures also for entering new areas such as  International  Value Added
        Services,  Regional  hubbing of traffic and to position India as a major
        regional  telecommunications  operator  in order to  achieve  the  Gross
        Margin as projected.



(6)     To achieve and maintain high degree of customer confidence by continuous
        upgradation of technology,  service  performance and prompt attention to
        customers.



                                                                               3
<PAGE>



                                  SECTION - II

                    COMMITMENTS OF VSNL FOR THE YEAR 2001-02

In  fulfillment  of its  commitments  under  MOU,  VSNL  undertakes  to  achieve
performance targets as under:-
<TABLE>
<CAPTION>

                                                                               CRITERIA VALUE
CRITERIA                               UNITS          WEIGHT   1         2         3           4           5
   *                                                    **                                                           BE (PSE)

                                                              HIGH                                        LOW   2000-01   2000-02

I  PHYSICAL
<S>                                 <C>                   <C> <C>        <C>       <C>       <C>        <C>         <C>      <C>

(1)  Telephone                      Mrts. Million         9%   2994.30   2851.71   2709.12   2573.67    2444.98     2480     2851.71

(2)  Leased Voice/Data Circuits         Nos.              3%  @4066.00      3800      3610      3430       3258      900        3800
     (including high speed
     circuits, 64 K and equivalent)

(3)  Internet       Bandwidth           Mbps              5%  @1578.25      1475      1401      1330       1264        -           -
                    Subscriber          Nos.              2%   @784738    733400    696730    661894     628799   476000      733400

(4)  Paid minutes per employee        Minutes             3%      3207      3055      2902      2757       2619     2664        3055
     per day

(5)  Project implementation #       Refer Annex 3         8%         1         2         3         4          5        -           -

II FINANCIAL: ##

(6)  Cross Margin (Profit before    Rs. Million          26%  24130.75  22512.44  20894.12  19356.73   17896.20    23927    22512.44
     Interest, Tax and Depreciation)

(7)  Net Profit after tax)/Capital  Percentage           26%     17.38     16.24     15.09     14.00      12.96    23.55       16.24
     employed x 100

(8)  Sundry Debtors (traffic) to    Percentage            4%        35        40        43        46         49        -           -
     Cross revenue

     Profit after tax               Rs. million               15059.02  14063.75  13068.49  12122.99   11224.77 16062.70    14063.75

     Capital employed               Rs. million                              86622.78                              68218    86622.78
    (at the end of the year)

III QUALITATIVE:-
                        Metro                             1%     53.75     51.25     48.69     46.25      43.93        -           -
(9)  ASR     (a)
             Incoming   Rest of     Percentage            1%      33.6        32      30.4      28.9      27.45        -           -
                        India

             (b) Outgoing                                 2%     54.07      51.5      48.9     46.48      44.16        -           -

(10) Network availability           Percentage            2%      99.0      98.7      98.4      98.1       97.8        -           -

(11) Consumer satisfaction          Percentage            5%         1         2         3         4          5        -           -

(12) Timely submission of draft     Date                  1%    Before    Before    Before    Before     Before        -           -
     MOU for 2002-03                                          Dec. 24,  Dec. 27,  Dec. 29,  Dec. 31,   Dec. 31,
                                                                  2001      2001      2001      2001       2001

(13) Timely submission Composite    Date                  1%    Before    Before    Before    Before     Before        -           -
     ______ for MoU 2001-02 on the                            April 30    May 2,    May 4,    May 6,     May 8,
     basis of provisional data                                    2001      2001      2001      2001       2000

(14) Timely signing of MoU for      Date                  1%    Before  April 1,  April 6, April 11,     Beyond        -           -
     2001-02                                                  April 1,      2001      2001      2001  April 11,
                                                                  2001                                     2001
</TABLE>




                                                                               4
<PAGE>





NOTES.

        Effect on  Declining  Settlement  Rates and  illegal  flow of  telephony
        traffic  through Data circuits has not been taken into  account.

        Normal  variations/escalations  in inputs  have been taken into  account
        while working out MoU targets.

**      Notes  on  weightage  for  different  parameters  are in  Annexure  1.

*       Explanatory  notes on the above criteria and the criteria  values are in
        Annexure 2.

#       For details of projects refer Annexure 3.

##      Foreign  Exchange  Earnings  out of  traffic  revenue  (gross) as per BE
        2001-02 is  estimated  to be Rs.  42.611.63  million  equal to US$926.34
        million.  Foreign  Exchange  Cost out of traffic  cost (gross) as per BE
        2001-02  is  estimated  to be  Rs.13424.3  million  equal to US  $291.83
        million  (at an  exchange  parity  rate of US $1 = Rs.46).  Net  foreign
        exchange earnings works out to Rs.29,187.38  million  equivalent to US $
        634.51 million.
@       For these performance criteria Level 1 values are 107% of Level 2 values
        as discussed in ATF meeting held on 20 February 2001.

        Data on the above  performance  indicators  for last 5 years is given in
        Artnexure 4.

ASSUMPTIONS:

a)      The financial  parameters  are agreed to be kept at the same level as BE
        figures,  with specific assumption that during the year collection rates
        for  international  telephony  shall  be  reduced  as  proposed  in  the
        discussion  paper  issued by TRAI.  If that does not  happen,  level two
        figures for financial parameters shall stand reduced  proportionately to
        be on par with the figure of telephone paid minutes of 285l.7lmillion at
        level 2 with 5% variation at other levels

b)      In order to achieve the projected level of Financial Parameters, and for
        the purpose of maximising  the asset  utilisation,  the Company shall be
        allowed equal  opportunity  to  participate in joint ventures to provide
        basic long distance and value added services.



                                                                               5
<PAGE>




                                  SECTION - III

                              DELEGATION OF POWERS

All  the  powers  to be  delegated  to  MOU  signing  companies  as  well  as to
'Navaratna'  companies as per the  notifications  issued by the Government  from
time to time shall accrue to VSNL.



                                                                               6
<PAGE>




                                  SECTION - IV

                         ASSISTANCE FROM THE GOVERNMENT

1.      Department  of Telecom  will  provide all  possible  assistance  to VSNL
        within the overall policy framework of the Government.



2.      The existing revenue sharing formula between VSNL and BSNL will be valid
        up to 31.03.2002 as already agreed.



3.      Facilities  will be  provided  as may be  necessary,  to enable  VSNL to
        provide  International  Calling Card services and associated value added
        services.



                                                                               7
<PAGE>




                                   SECTION - V

                  FREQUENCY OF MONITORING AND INFORMATION FLOW

Performance  of VSNL will be evaluated by its  achievements  against the targets
given in this MOU. The quarterly  report on the  achievements  against the above
targets  would be sent by VSNL to  DPE/DOT  within  30 days of the  close of the
quarter.  VSNL will  indicate  reasons for  shortfall,  if any, in achieving the
targets in these reports.

/s/S.K. Gupta                                /s/Shyamal Ghosh
----------------------------                 ----------------------------------
S.K. GUPTA                                   SHYAMAL GHOSH
Chairman & Managing Director                 Secretary, Department of Telecom &
Videsh Sanchar Nigam Limited                 Chairman, Telecom Commission
Mumbai.                                      New Delhi.




Dated :  28 March, 2001
Place  : New Delhi



                                                                               8
<PAGE>




                                                                    ANNEXURE - 1

                NOTE ON WEIGHTAGE GIVEN FOR DIFFERENT PARAMETERS.
                ------------------------------------------------

1.       VSNL's overseas telecommunications  functions provide telephony, telex,
         telegraphy  and  other  services  to  Indian  customers.  However,  the
         telephony  service dominates in the overall business in terms of volume
         of  revenue  earned to the  extent  of about 90% of the total  revenue.
         Weightage given to this is 9%. Leased  voice/data  service which is now
         gaining importance is given weightage of 3%.

2.       Parameter for Internet is split in two parts, viz.  internet  bandwidth
         and  number  of   Internet   customers,   with  5%  and  2%   weightage
         respectively.

3.       The  improvement in  productivity  of employees is reflected  under the
         criteria 4. Weightage given is 3% as per discussions at ATF

4.       In line with the  guidelines  issued by the  Government,  parameters of
         gross  margin  and Net  profit  to  capital  employed  ratio  have been
         included.  However,  weightage  given to these  parameters  are 26% for
         criteria 6 and 26% for criteria 7 as per the discussions in ATF.

5.       VSNL  being a service  oriented  organisation,  the  quality of service
         provided is reflected  under  criteria Nos. 9 and 10 which show, up and
         running  hours of the network and  adequacy  of network  facilities  to
         satisfy customer demands.

6.       Customer  satisfaction  (criteria  11) is a  prime  parameter  for  any
         service  organisation  like VSNL.  Customer  satisfaction  is evaluated
         through an assessment by art independent organisation.

7.       Criteria 12, 13 & 14 regarding timely  submission of MOU etc. have been
         added as per DPE's requirement with total weightage of 3%.




                                                                               9
<PAGE>




                                                                    ANNEXURE - 2

                EXPLANATORY NOTES ON CRITERIA AND CRITERIA VALUES

1.       TELEPHONE PAID MINUTES

         2851.71  million  telephone  paid  minutes  has been  taken at level 2,
         presuming 15% growth over 2000-01 level 2 figure of 2480 telephone paid
         minutes of telephone  traffic.  5% variation is presumed for each level
         from 1 to 5.

2.       LEASED VOICE/DATA CIRCUITS

         The number of Voice/data circuits  (including high speed circuits,  64k
         and  equivalent)  at the end of the year 2001-02 is expected to be 3800
         circuits  and is shown at level 2. A variation of 7% is shown for Level
         I and 5%  progressively  at other levels as per discussions in ATF held
         on 20 February 2001.

3.       INTERNET SUBSCRIBERS

         (a)      A number of  733,400  is taken to be the  number  of  Internet
                  subscribers as of 31 March, 2002 as level 2 figure,  variation
                  of 5% is taken for the other levels.  Variation of 7% is taken
                  on Level I and 5%  for all other levels as per  discussions in
                  ATF held on 20 February 2001.

         (b)      As  discussed  in  ATF  last  year,   Bandwidth  parameter  is
                  continued. Bandwidth of 1475 is taken at level 2. Variation of
                  7% is  taken  on Level I and 5% for all  other  levels  as per
                  discussions in ATF held on 20 February 2001.

4.       PAID MINUTES PER EMPLOYEE PER DAY

         The term "paid minutes" is defined as the sum of

         a)       Total telephone paid Minutes;

         b)       Total telex paid Minutes (for each level from high to low in
                  million paid minutes 7.4, 7.05, 6.70, 6.36 and 6.04);

         c)       Total GPSS connect time (for each level from high to low in
                  million paid minutes 3.15, 3.0, 2.85, 2.70 and 2.57)

         300 days are  reckoned  in a year.  The volume of paid  minutes at each
         level is divided by estimated number of employees i.e. 3123 (Average of
         estimated  number of  employees  as on  31.3.2001 - 3075 and  estimated
         number of employees as on 31.3.2002 -- 3170.  Resulting  figures of per
         employee per day are shown at respective levels.



                                                                              10
<PAGE>

5.       PROJECT IMPLEMENTATION

         Important  projects whose  implementation has got direct bearing on the
         performance of the Company are identified  (Annexure 3). As directed by
         DPE  afler  ATF  meeting,  month  of  completion  at  levels 1 to 5 are
         indicated.  If the date of  completion  of a particular  project  stage
         falls  between  months  mentioned  at any  two  levels,  score  will be
         calculated  based on the month  mentioned  against the  nearest  level,
         total score culminating in to a consolidated score between 1 to 5. Each
         project will carry equal weightage.

6.       GROSS MARGIN

         Gross  margin is taken as the excess of Traffic  Revenue,  Revenue from
         Intelsat/Inmarsat  and other income over direct expenses.  It is profit
         before interest, tax and depreciation. BE 2001-02 figure of Rs.22512.44
         million appears at level 2 with due variation at other levels.

7.       NET PROFIT TO CAPITAL EMPLOYED

         Net profit is profit  after tax.  The capital  employed of  Rs.86622.78
         million is  estimated  as at end of the year and is worked out as fixed
         assets  including  capital work in progress plus investment in Intelsat
         and Inmarsat and net current  assets.  The commercial  investments  and
         return  on the same have been  excluded.  Indicated  figure is ratio of
         profit after tax to capital employed.

8.       SUNDRY DEBTORS (TRAFFIC) TO GROSS REVENUE IN PERCENTAGE

         In international telecommunication business, as per CCITT arrangements,
         the traffic figures in paid minutes/paid  words for different  services
         are exchanged  between  different  administrations  on a monthly basis.
         After  reaching an agreement  on the quantum of the traffic  volume for
         each  service,  the  accounts  are settled by applying the agreed Total
         Accounting   Rate  (TAR)  between  India  and   corresponding   foreign
         administrations  on a quarterly basis. Thus,  theoretically,  only nine
         months of traffic data would be exchanged before the close of the year.
         However,  the  acceptance  of the traffic  figures and effecting of the
         payment  will take  further  time,  say about  another 3 months.  Thus,
         theoretically;  collection  of a  maximum  of only  50% of  yearly  net
         revenue could be achieved in a year from foreign  administrations.  The
         quantum  of  settlement  relates  not only  between  VSNL  and  foreign
         administrations  but also between VSNL and DTS, for the account towards
         domestic  portion of the traffic.  As the percentages of sundry traffic
         debtors is worked out to gross revenue and after  assuming that revenue
         from DTS has been  realised/adjusted,  around 40% of Gross revenue will
         remain  outstanding in a year. This figure,  which is a BE figure,  has
         been shown at level 2 with due variation at other levels.

9.       CALL COMPLETION PERFORMANCE - ASR (INCOMING & OUTGOING)

         The  parameter  indicates  call  clearance  in both  inward and outward
         direction of international exchanges. The Answer to Seizure Ratio (ASR)
         of calls through the exchanges in both the  directions  are  calculated
         based on sample day readings  taken once in a month in both  directions
         from/to the top ten  countries.  The annual ASR in  percentage  in both
         directions  is  calculated  based on the  average  of samples of twelve
         months separately for incoming and outgoing traffic.

10.      NETWORK AVAILABILITY

         Network  performance  is judged  as  availability  of trunks  excluding
         outages due to DTS link failures at the international Gateway Exchanges
         to  put  through   telephone   calls  to  foreign   destinations.   The
         availability  figures based on the level  achievable  corresponding  to
         down  time of 5 Hours,  7 Hours,  9 Hours,  11 Hours  and 13 hours in a
         month  are  indicated  respectively  at  levels  1, 2, 3, 4 and 5.  The


                                                                              11
<PAGE>

         parameter will be evaluated by judging the  performance at all the four
         gateway exchanges for the top ten countries.

11.      CUSTOMER SATISFACTION

         Customer  satisfaction  will be evaluated  through an  assessment to be
         carried out by an independent agency of national standing.

12 to    Criteria for timely submission  of MOU, Performance evaluation for MOU,
14       and timely signing of MOU have been added as required by DPE.




                                                                              12
<PAGE>




                                                                     ANNEXURE -3
        PROJECTS WHOSE PROGRESS OF IMPLEMENTATION DURING THE YEAR 2001-02
                      WOULD BE VITAL FOR VSNL PERFORMANCE.
<TABLE>
<CAPTION>

<S> <C>                                                 <C>          <C>           <C>            <C>          <C>

No  Name of the Project                                     Level 1       Level 2       Level 3       Level 4    Level 5

1.  Establishment of ATM Gateway Nodes - Commencement   August 2001  October 2001  January 2002    March 2002   May 2002
    of installation at two locations

2.  Standard B Earth Station at Hyderabad Gateway        Sept. 2001     Nov. 2001     Feb. 2002    April 2002  June 2002
    - Commissioning

3.  Standard F3 Earth Station at Patna - Commissioning    June 2001    Sept. 2001     Dec. 2001    March 2002   May 2002

4.  SAFE Cable Project - Commissioning                    Dec. 2001    March 2002     June 2002   August 2002  Oct. 2002

5.  Standard E3 Earth Station at Greater Kailash,         Feb. 2002    March 2002    April 2002      May 2002  June 2002
    N.Delhi - Award of Contract

6.  Gandhinagar Gateway Earth Station - Land               May 2001     July 2001    Sept. 2001     Nov. 2001  Dec. 2001
    acquisition for Gateway Earth Station

7.  INMS -Award of Contract                               Dec. 2001     Feb. 2002    April 2002     June 2002  July 2002

8.  VoIP -Award of Contract                               Oct. 2001     Dec. 2001     Feb. 2002    April 2002   May 2002

9.  F3 Earth Station Hub at Gurgaon -Commencement of      Dec. 2001     Feb. 2002     June 2002   August 2002  Oct. 2002
    installation

10. Launch of Internet Services in non-metro Gateways     Dec. 2001    March 2002     June 2002    Sept. 2002  Dec. 2002

</TABLE>



                                                                              13
<PAGE>





                                                                    ANNEXURE - 4
<TABLE>
<CAPTION>

                       PERFORMANCE INDICATORS PAST TRENDS

<S>                              <C>             <C>          <C>            <C>         <C>          <C>         <C>

PHYSICAL                              UNITS          94-95        95-96          96-97      97-98        98-99    1999-2000

TELEPHONE                            MINUTES           942      1147.56         138493    1684.51      1935.01      2245.83

                                     MILLION

LEASED VOICE DATA CIRCUIT            NUMBERS           233          299            446        638          661          659

INTERNET BANDWIDTH                    MBPS               -        4.408         15.640     27.640       79.152          167

INTERNET CUSTOMERS                                       -         5160          29116      87000       213045       366432

PAID MINUTE/PER                      MINUTES          1166         1403           1652      19.85         2231      2518.46
EMPLOYEE PER DAY

REVENUE                              RUPEES      36068.09$    44730.71$      52853.05$   64361.33     71735.68     72305.08

                                     MILLION
PROJECT IMPLEMENTATION                  %            63.33       102.85             90       1.81         2.16            4

CAPITAL EMPLOYED                     RUPEES       11697.24     14293.03       20371.72   28317.56     39949.10        52149

                                     MILLION

GROSS MARGIN (PROFIT               RS. MILLION     5347.21      7717.91        9097.97   14951.33     19942.86        20852

BEFORE INTEREST, TAX AND

DEPRECIATION)

NET PROFIT/CAPITAL                      %            25.55        28.60          24.78      34.18        33.17      16.11##

EMPLOYED
 TOTAL O/S TO GROSS REVENUE             %            29.45           30          28.95       28.5        29.76        36.88
           INCO      Metro                           30.48        47.17          48.56      50.47        52.43        54.48
           MING      Rest of                                      26.71          31.56      31.86        32.16        33.49
                     India
ASR        OUTGOING                     %            51.22        53.41          52.78      53.03        53.27        51.42

NET F.E. EARNINGS                R.S. MILLION       9016.2     15311.79          18939   23977.65     47376.23     48171.18
</TABLE>

         @        Capital  employed  figure  excludes an amount of  Rs.11.909.88
                  million representing monies raised by way of Euro equity issue
                  for the reason  that these  funds were  raised only on 27 Mach
                  1997.

         ##       On  account of the  unforeseen  development  of  writing  down
                  investment  in ICO by Rs. 5127  million  the net profit  which
                  otherwise  would have been Rs.  13530  million is taken as Rs.
                  8403 million only. But fur ICO investment write down, the ROCE
                  would have been 25.95%.




                                                                              14