Now the 1 October deadline is over. The Department of Telecommunications (DoT) has received over 400 appplications for universal accesss service licences (UASL). Now that's not 400 companies. Each of the new bidders has filed 22 applications each to cover the entire country. (The bidders have to file a separate application for each of India's 22 circles--that is equivalent to a state).
Among the big names who have filed in their bids are AT&T in collaboration with Mahindra Telecommunications and Russia's Sistema with Shyam Telelink. Many of India's telecom companies that lost out in the race earlier like Himachal Futuristic Communications Ltd (HFCL)are also in the race. The surprise entry is from a host of Indian realty players including Delhi-based DLF, Unitech and Parsvnath. All of these are flush with cash and are looking to make a splash in telecom.
Not surprisingly, all of the new players are looking at just marketing their venture. This is what Bharti Airtel did, but years after it started services. Videocon for example is looking to use its 15,000 strong retailer network to sell the service.
Will all this work?
It all depends on what norms the DoT come up with. After all setting and running a telecom network does not mean just plonking Rs 1,600 crore on the table. But, there are enough telecom professional in India who can help these companies roll-out their networks.
So do we see calls at 20 paise a minute? Or will this lead to another round of consolidation a couple of years down the road?
I believe that there is no place for more than eight players. we already have six in each circle. So who all will last in the long run? Well, simply wait and watch as the latest saga unfolds.
Well, I think I should have also put in a bid last evening. But, then there is enough scope when one of these guys wants to sell it--at a premium.
Tuesday, October 2, 2007
Thursday, September 20, 2007
3G for rural masses
If you thought that 3G was something meant for city slickers to download music and videos only, think again. Sweden-based Ericsson has launched the Gramjyoti Rural Broadband project in 18 villages and 15 towns near Chennai. Under the project, Ericsson is using the existing 2G network of operators like Bharti Airtel, BSNL and Aircel to provide a slew of services to rural folk.
The pilot project uses HSPA (high speed packet access) to provide e-education, tele-medicine, e-governance, entertainment and video conferencing facilities in the region. More than being a corporate social responsibility (CSR) project, this demonstrates to the people and the government how to provide people centric facilities.
Though this project is on for just three months, government support could ensure that rural folk across the country can benefit from the latest technology. Plus the cost implications are not too high. Apollo Hospitals claims that if each family of four pays just Rs 2 a day (Rs 60 a month), it can provide medical facilities in the villages. Ericsson's partners in the venture apart from Apollo include Hand in Hand - an NGO, Edurite, One97, CNN and Cartoon Network.While it has tied up with CNN,
The other plus is getting government documentation (birth, death certificates), land records etc sitting in the village. Currently, this is a showcase project. Once this is replicated across the country only will the benefits begin to flow.
The pilot project uses HSPA (high speed packet access) to provide e-education, tele-medicine, e-governance, entertainment and video conferencing facilities in the region. More than being a corporate social responsibility (CSR) project, this demonstrates to the people and the government how to provide people centric facilities.
Though this project is on for just three months, government support could ensure that rural folk across the country can benefit from the latest technology. Plus the cost implications are not too high. Apollo Hospitals claims that if each family of four pays just Rs 2 a day (Rs 60 a month), it can provide medical facilities in the villages. Ericsson's partners in the venture apart from Apollo include Hand in Hand - an NGO, Edurite, One97, CNN and Cartoon Network.While it has tied up with CNN,
The other plus is getting government documentation (birth, death certificates), land records etc sitting in the village. Currently, this is a showcase project. Once this is replicated across the country only will the benefits begin to flow.
Thursday, September 6, 2007
Heading for court?
The recommendations by the Telecom Regulatory Authority of India (Trai) on the review of licence terms has put the cat among the pigeons. At first glance the biggest gainer is Anil Ambani-led Reliance Communications.
That's because Trai has at one go sought to tighten the norms for allocating additional spectrum to existing operators. Under the old norms, an operator in a C circle would get 15 MHz of spectrum with 1.2 million subscribers. The new norms mean that the same operator would get only 8 Mhz. To get 15 Mhz, the operator needs to have 8 milllion subscribers.
What it does is simply ensure that all those operators who had sought additional spectrum will not get any till they reach a much higher subscriber base. However, it cleans the way for new operators. After all, Trai has removed the cap on operators in a circle. So, logically there can be any number of operators, provided there is spectrum.
So operators like Aircel, Spice and Reliance will be in a better position to get spectrum. The big question is will all these operators set up the networks? Seems unlikely. What is likely to emerge is a set of operators who will hawk off the licences and the spectrum to existing operators.
Of the players in the running, this is a great opportunity for Reliance to roll-out a nationwide GSM network. The fun has just begun.
As things stand, lawyers will rake it in till such time as this debate is settled.
That's because Trai has at one go sought to tighten the norms for allocating additional spectrum to existing operators. Under the old norms, an operator in a C circle would get 15 MHz of spectrum with 1.2 million subscribers. The new norms mean that the same operator would get only 8 Mhz. To get 15 Mhz, the operator needs to have 8 milllion subscribers.
What it does is simply ensure that all those operators who had sought additional spectrum will not get any till they reach a much higher subscriber base. However, it cleans the way for new operators. After all, Trai has removed the cap on operators in a circle. So, logically there can be any number of operators, provided there is spectrum.
So operators like Aircel, Spice and Reliance will be in a better position to get spectrum. The big question is will all these operators set up the networks? Seems unlikely. What is likely to emerge is a set of operators who will hawk off the licences and the spectrum to existing operators.
Of the players in the running, this is a great opportunity for Reliance to roll-out a nationwide GSM network. The fun has just begun.
As things stand, lawyers will rake it in till such time as this debate is settled.
Tuesday, September 4, 2007
Exploding batteries
Global mobile giant Nokia is in a bit of a quandary in India. While Nokia CEO Olli Pekka Kallasvuo announced in New Delhi that India is the second largest market for Nokia after China, Nokia has been hit by the battery. Ever since Nokia came up with an advisory on the BL-4C battery, television channels have been focussing on exploding batteries.
In the process, TV channels claim that 10-12 handsets have exploded over the last couple of weeks. Surprisingly, in no other country do we have exploding batteries. While Nokia India's Shivkumar has taken pains to point out that the exploding batteries are fake, the pressure is immense. After all, it is the largest multinational in India. It is estimated that 85 million out of India's 192 million mobile users are using Nokia.
Though the advisory was for a certain 46 million phones that were sold all over the world, people queued outside outlets in India to replace their batteries. Shivkumar points out that 25% of the people who had the problematic battery have got a replacement. The balance will get it in the next fortnight.
While everyone has debunked the conspiracy theory, one thing is sure: demand for phones of rival vendors seem to have gone up.
So where does that leave Nokia? It is not really hit simply because this is for the first time ever that any corporation is replacing any part in its products in such large volumes in India. The next few months will show the impact of the battery advisory.
In the process, TV channels claim that 10-12 handsets have exploded over the last couple of weeks. Surprisingly, in no other country do we have exploding batteries. While Nokia India's Shivkumar has taken pains to point out that the exploding batteries are fake, the pressure is immense. After all, it is the largest multinational in India. It is estimated that 85 million out of India's 192 million mobile users are using Nokia.
Though the advisory was for a certain 46 million phones that were sold all over the world, people queued outside outlets in India to replace their batteries. Shivkumar points out that 25% of the people who had the problematic battery have got a replacement. The balance will get it in the next fortnight.
While everyone has debunked the conspiracy theory, one thing is sure: demand for phones of rival vendors seem to have gone up.
So where does that leave Nokia? It is not really hit simply because this is for the first time ever that any corporation is replacing any part in its products in such large volumes in India. The next few months will show the impact of the battery advisory.
Thursday, August 2, 2007
Rising revenues
A quick look at the first quarter results of telecom companies' shows that revenues are clearly soaring. During Apr-Jun 2007, Bharti Airtel has seen its gross revenues hit Rs 5,905 crore ($ 1.47 billion), an increase of 53% over the same period last year. If one took into account only the mobile revenues, then it has touched Rs 4,697.6 crore ($1.17 billion. That's 65% over last year.
But Bharti is not the only one with great results. IDEA Cellular which has come out with its results for the first time since listing has recorded a turnover of Rs 1,477.6 crore ($ 369.4 million). Reliance Communications has notched Rs 4,304 crore ($ 1.07 billion)up 32%. Of that mobile earnings are Rs 3373 crore ($ 843 million. EBITDA margins are in the 40% plus range now.
But if one looks at the earnings per subscriber, that's not too different. Going by the June subscriber base, Bharti's 42.7 million mobile subscribers paid-up Rs 1,100 each during the quarter. That works out to Rs 366.67 ($9.16) per month. IDEA's 16.12 million subscribers paid on an average Rs 305 ($ 7.63) each month. Reliance subscribers paid Rs 351.33 ($8.78) per month.
In all , the per subscriber earnings are hardly different for the operators. Bharti is ahead primarily because of the huge lead it has in subscriber numbers.
But Bharti is not the only one with great results. IDEA Cellular which has come out with its results for the first time since listing has recorded a turnover of Rs 1,477.6 crore ($ 369.4 million). Reliance Communications has notched Rs 4,304 crore ($ 1.07 billion)up 32%. Of that mobile earnings are Rs 3373 crore ($ 843 million. EBITDA margins are in the 40% plus range now.
But if one looks at the earnings per subscriber, that's not too different. Going by the June subscriber base, Bharti's 42.7 million mobile subscribers paid-up Rs 1,100 each during the quarter. That works out to Rs 366.67 ($9.16) per month. IDEA's 16.12 million subscribers paid on an average Rs 305 ($ 7.63) each month. Reliance subscribers paid Rs 351.33 ($8.78) per month.
In all , the per subscriber earnings are hardly different for the operators. Bharti is ahead primarily because of the huge lead it has in subscriber numbers.
Monday, July 30, 2007
New minister soon?
It's been close to three months since Andimuthu Raja took over as communications and information technology minister. He has managed to raise hell over BSNL's 65 million-line tender. Now the 23 million line tender is almost through.
But, the big question that is doing the rounds of both Sanchar Bhawan and Electronics Niketan is whether he will complete three months?
That's because if one goes by the whispers that are doing the rounds of the ministry, Raja could make way soon. After all, everyone knows that Chennai decides who the communications minister and not the Prime Minister.
While no one is willing to put a date for the changeover, what is reliably known is that soon India will have its first woman communications minister. After all, with a woman President and a woman chairperson of the National Advisory Council, why not have a woman communications minister.
One only hopes that her communication skills are better than Raja.
But, the big question that is doing the rounds of both Sanchar Bhawan and Electronics Niketan is whether he will complete three months?
That's because if one goes by the whispers that are doing the rounds of the ministry, Raja could make way soon. After all, everyone knows that Chennai decides who the communications minister and not the Prime Minister.
While no one is willing to put a date for the changeover, what is reliably known is that soon India will have its first woman communications minister. After all, with a woman President and a woman chairperson of the National Advisory Council, why not have a woman communications minister.
One only hopes that her communication skills are better than Raja.
Wednesday, July 25, 2007
Sexy towers
The newest fascination in the telecom sweepstakes are towers. So what if they look ungainly, spoil the looks of a city and yet you do not get great coverage. Every operator seems to have spun off its mobile tower business into a separate entity. First Reliance Communications sold 5% stake in its tower company for Rs 1,400 crore. That puts the enterprise value of the tower company at Rs 28,000 crore ($ 7 billion).
As if that was not enough, the $ 1.4 billion American Tower Corporation (ATC)that owns or operates 22,000 telecom towers in the US, Mexico and Brazil is setting up its Asia-Pac headquarters in Delhi. It is looking at initially managing towers of Indian mobile operators. The idea is to get more operators onto each tower. At a later stage ATC it could set up its own towers or even look at acquiring a tower company.
Currently, India has 100,000 telecom towers of which 35,000 are owned by Bharti Airtel. The whole idea behind this scheme is co-locating the electronics equipment of at least two operators on a single tower. Obviously, there are major cost benefits to the operator.
But already mobile operators have outsourced their networks and their IT infrastructure. If they also manage to outsource their towers, then what is left of a telecom company? Al you need is service agreements with each of the vendors to ensure quality. And in case there are issues with coverage then the blame can be passed on to eother of the vendors.
So are mobile operators just there for branding and marketing a service? That's something i guess none of the guys who sold out of the telecom business seem to have ever considered.
As if that was not enough, the $ 1.4 billion American Tower Corporation (ATC)that owns or operates 22,000 telecom towers in the US, Mexico and Brazil is setting up its Asia-Pac headquarters in Delhi. It is looking at initially managing towers of Indian mobile operators. The idea is to get more operators onto each tower. At a later stage ATC it could set up its own towers or even look at acquiring a tower company.
Currently, India has 100,000 telecom towers of which 35,000 are owned by Bharti Airtel. The whole idea behind this scheme is co-locating the electronics equipment of at least two operators on a single tower. Obviously, there are major cost benefits to the operator.
But already mobile operators have outsourced their networks and their IT infrastructure. If they also manage to outsource their towers, then what is left of a telecom company? Al you need is service agreements with each of the vendors to ensure quality. And in case there are issues with coverage then the blame can be passed on to eother of the vendors.
So are mobile operators just there for branding and marketing a service? That's something i guess none of the guys who sold out of the telecom business seem to have ever considered.
Another 7.3 million mobile subscribers
The Indian telecom subscriber base has touched 225 million. Mobile subscribers account for 185 million. In June 2007, the mobile telecom subscriber base shot up by 7.3 million new subscribers. That's the highest ever additions in the country. It has also eclipsed the 7.06 million new subscribers that China added during the month.
In fact, in the first quarter of this fiscal (Apr-Jun, over 20 million new mobile subscribers were added. However, the fixed line base has fallen by 0.66 million during the period to 40.09 million. GSM operators added 5.38 million subscribers while CDMA operators added another 1.92 million. Leading the race was Bharti Airtel that added 1.96 million, followed by Reliance Communications (1.59 million) and Vodafone Essar (1.54 million). However, all that pales into insignificance when one looks at China, where China Mobile added 5.53 million subscribers and China Unicom another 1.53 million.
Not surprisingly, BSNL has managed to add just 0.43 million. After all where do you add subscribers when your network is choked to the gills. Hopefully, minister A Raja withstanding, BSNL can go ahead with the truncated tender for 23 million GSM lines.
In fact, in the first quarter of this fiscal (Apr-Jun, over 20 million new mobile subscribers were added. However, the fixed line base has fallen by 0.66 million during the period to 40.09 million. GSM operators added 5.38 million subscribers while CDMA operators added another 1.92 million. Leading the race was Bharti Airtel that added 1.96 million, followed by Reliance Communications (1.59 million) and Vodafone Essar (1.54 million). However, all that pales into insignificance when one looks at China, where China Mobile added 5.53 million subscribers and China Unicom another 1.53 million.
Not surprisingly, BSNL has managed to add just 0.43 million. After all where do you add subscribers when your network is choked to the gills. Hopefully, minister A Raja withstanding, BSNL can go ahead with the truncated tender for 23 million GSM lines.
Wednesday, July 18, 2007
$2 billion Bharti-Ericsson deal
While state-owned Bharat Sanchar Nigam Ltd (BSNL)is still debating on the size of the GSM contract, market leader Bharti Airtel has gone ahead and signed a $ 2 billion (Rs 8,000 crore)equipment deal with Sweden's Ericsson. Under one of the largest such deals ever, Ericsson will design, plan, deploy, optimise and manage Bharti's GSM network across 15 circles. As part of the two year supply and services contract it will also deliver a pan-Indian integrated device management solution for Bharti.
Bharti is not the only private operator that is committing huge capex for expanding its network. Reliance Communications Ltd., India's second-biggest mobile services provider last week awarded two network expansion contracts worth more than $600 million to Alcatel-Lucent and China's Huawei Technologies. Bharti itself had recently signed a $900 million deal with Nokia Siemens Networks (NSN).
So whether BSNL and communications minister A Raja like it or not, the private operators are going all out to capture a large slice of India's unconnected masses. Unless BSNL gets its act into place quickly, it will realise that most of these people in rural India have already made up their mind about a mobile connection well before it reaches there. That could be a sad story for a corporation that focussed initially on small-town India while private operators were looking only at urban India. Bharti currently has 42.68 million customers of which 40.74 million are mobile customers.
Bharti is not the only private operator that is committing huge capex for expanding its network. Reliance Communications Ltd., India's second-biggest mobile services provider last week awarded two network expansion contracts worth more than $600 million to Alcatel-Lucent and China's Huawei Technologies. Bharti itself had recently signed a $900 million deal with Nokia Siemens Networks (NSN).
So whether BSNL and communications minister A Raja like it or not, the private operators are going all out to capture a large slice of India's unconnected masses. Unless BSNL gets its act into place quickly, it will realise that most of these people in rural India have already made up their mind about a mobile connection well before it reaches there. That could be a sad story for a corporation that focussed initially on small-town India while private operators were looking only at urban India. Bharti currently has 42.68 million customers of which 40.74 million are mobile customers.
Monday, July 16, 2007
23 million lines for now
Communications minister A Raja has had it his way. The BSNL board has agreed on installing 23 million 2G lines. The contenders will be Ericsson and Nokia Siemens Networks(NSN). So if nothing else changes, Ericsson will have to set up 13.8 million lines, while NSN will do the balance 9.2 million.
Obviously BSNL will seek lower prices from the two vendors and they will get that.
So what happens to the 3G component? Well, going in true government style, there will be another tender for 3G. Going by the pace at which such things happen, it will take another year before everything is finally sorted out. Add another six months for installation provided there is no hue and cry. So, by that logic, state-owned BSNL will be able to provide 3G services only in early 2009. By then, most private operators would have rolled out services.
But, that could be a blessing in disguise for BSNL if the entire debate over spectrum allocation is not settled till then. Does that still justify the time it took for BSNL to come to a solution? Obviously, BSNL officials will have to speed up operations despite the hassles they face from a plethora of government bodies (Central Vigilance Commission, CBI, CAG etc). Only then can BSNL be in a position to keep pace with private operators.
In June 2007, while the GSM operators added 5.38 million new subscribers, BSNL added just 0.43 million, which is a shade better than Aircel's 0.37 million. That's way below Bharti's 1.96 million, Vodafone Essar's 1.54 million, IDEA Cellular's 0.86 million new adds in June. BSNL's share in the GSM market has also fallen to 20.90%, while Vodafone Essar has increased to 22.61%.
It's high time BSNL got its act in place. Or else it could end up being one more chapter in India's telecom history.
Obviously BSNL will seek lower prices from the two vendors and they will get that.
So what happens to the 3G component? Well, going in true government style, there will be another tender for 3G. Going by the pace at which such things happen, it will take another year before everything is finally sorted out. Add another six months for installation provided there is no hue and cry. So, by that logic, state-owned BSNL will be able to provide 3G services only in early 2009. By then, most private operators would have rolled out services.
But, that could be a blessing in disguise for BSNL if the entire debate over spectrum allocation is not settled till then. Does that still justify the time it took for BSNL to come to a solution? Obviously, BSNL officials will have to speed up operations despite the hassles they face from a plethora of government bodies (Central Vigilance Commission, CBI, CAG etc). Only then can BSNL be in a position to keep pace with private operators.
In June 2007, while the GSM operators added 5.38 million new subscribers, BSNL added just 0.43 million, which is a shade better than Aircel's 0.37 million. That's way below Bharti's 1.96 million, Vodafone Essar's 1.54 million, IDEA Cellular's 0.86 million new adds in June. BSNL's share in the GSM market has also fallen to 20.90%, while Vodafone Essar has increased to 22.61%.
It's high time BSNL got its act in place. Or else it could end up being one more chapter in India's telecom history.
Wednesday, July 11, 2007
Status quo
Yes, I have been not blogging for sometime now. Took a two week break from work. That's been refreshing. Am back in Delhi. It's still hot, but bearable.
As far as the telecom industry is concerned, nothing radical seems to have happened. The big dispute on the BSNL tender is yet to be resolved. So, 16 months after the BSNL tender for 63.5 million mobile lines was announced, not a single line has been commissioned. Minister A Raja wants Ericsson to lower the rate to $ 90 per line (it quoted $ 107 per line), which it is loathe to do. Huawei has reportedly offered to do it at $ 87 per line. He wants to know if Motorola can do it cheaper. Add to that the planned strike by BSNL employees.
Thanks to the delay, BSNL is simply going down the drain. Even if "The Raja" manages to get Ericsson to lower prices by $ 17, BSNL will gain a shade over $ 1 billion. But, nobody seems to be looking at the opportunity cost. Today BSNL is simply losing out to other operators who are adding on many more subscribers than it. During April-May '07 BSNL added just 574,000 new subscribers as opposed to Bharti Airtel's 3.6 million. Even Aircel that is present only in 9 out of the 23 circles had picked up 8.9 lakh subscribers.
Till early 2006, BSNL used to account for 20-25% of the net subscriber additions. In May, it accounted for just 4.7%.
If nothing is done quickly, BSNL will slip further. Simply put, it's high time Raja put his house in order and clear issues that have been pending. That will provide him a lot more sheen than trying to re-visit every decision taken by his predecessor.
As far as the telecom industry is concerned, nothing radical seems to have happened. The big dispute on the BSNL tender is yet to be resolved. So, 16 months after the BSNL tender for 63.5 million mobile lines was announced, not a single line has been commissioned. Minister A Raja wants Ericsson to lower the rate to $ 90 per line (it quoted $ 107 per line), which it is loathe to do. Huawei has reportedly offered to do it at $ 87 per line. He wants to know if Motorola can do it cheaper. Add to that the planned strike by BSNL employees.
Thanks to the delay, BSNL is simply going down the drain. Even if "The Raja" manages to get Ericsson to lower prices by $ 17, BSNL will gain a shade over $ 1 billion. But, nobody seems to be looking at the opportunity cost. Today BSNL is simply losing out to other operators who are adding on many more subscribers than it. During April-May '07 BSNL added just 574,000 new subscribers as opposed to Bharti Airtel's 3.6 million. Even Aircel that is present only in 9 out of the 23 circles had picked up 8.9 lakh subscribers.
Till early 2006, BSNL used to account for 20-25% of the net subscriber additions. In May, it accounted for just 4.7%.
If nothing is done quickly, BSNL will slip further. Simply put, it's high time Raja put his house in order and clear issues that have been pending. That will provide him a lot more sheen than trying to re-visit every decision taken by his predecessor.
Friday, June 1, 2007
A Raja--what a minister
The new communications ministers' first press conference said it all. He thanked Dr Kalignar (Tamil Nadu chief minister and DMK party chief to the unitiated), prime minister Manmohan Singh and of course, Sonia Gandhi. So, we now have a telecom minister who owes his allegiance to a lot of people.
After all, Raja got the job because former communications minister Dayanidhi Maran's brother Kalanidhi Maran published a poll on the political heir of Karunanidhi that showed his elder son MK Azhagiri way behind. Family politics at its worst.
Raja simply denied that Dayanidhi Maran had done any work on the free roaming plan that is being launched on Karunanidhi's birthday (June 3). He said: "There was no exercise done prior to this on free roaming. I took the first step." That after Maran had claimed that he planned such a scheme soon after he lost the job.
Now that we have a new minister, he has decided to prepare a policy document on 3G that will be placed before Parliament. When? He has no answers to such complicated questions. He admitted that he has asked BSNL to negotiate with Ericsson for lowering the price for the 60 million line tender. The deal was done at $ 107 per line. Says Raja: "I have asked them to get it down to $ 100 or less per line." However, Raja is not bothered by the fact that BSNL's network is already choking. Each day's delay will mean that BSNL loses out to private operators.
Such things don't matter in the populous mind of Raja. If this is what the minister is planning then it is unlikely that 3G will happen even in late 2008, forget this year.
By the way, do not take Maran's name in front of Raja. A Tamil publication journalist who began asking something was shouted down by Raja.
A small piece of advice for the belligerent minister, who is otherwise an advocate. You may shout down at the media once. But, in case you are here for sometime it works both ways. After all Delhi is not Tamil Nadu where people are willing to give their lives for all kinds of otherwise nondescript politicians. It does not matter who picked you up for the post Mr Raja. Finally, it all happens on what you deliver.
One thing is clear. With this man as minister, life is going to be interesting.
P.S. I don't know whether this is something to do with DMK ministers. I was once at a conference where T R Baalu was supposed to speak. He landed on time and left on time. That was amazing for a minister. But, while leaving he did explain that he had to be on time to meet Madam!!
After all, Raja got the job because former communications minister Dayanidhi Maran's brother Kalanidhi Maran published a poll on the political heir of Karunanidhi that showed his elder son MK Azhagiri way behind. Family politics at its worst.
Raja simply denied that Dayanidhi Maran had done any work on the free roaming plan that is being launched on Karunanidhi's birthday (June 3). He said: "There was no exercise done prior to this on free roaming. I took the first step." That after Maran had claimed that he planned such a scheme soon after he lost the job.
Now that we have a new minister, he has decided to prepare a policy document on 3G that will be placed before Parliament. When? He has no answers to such complicated questions. He admitted that he has asked BSNL to negotiate with Ericsson for lowering the price for the 60 million line tender. The deal was done at $ 107 per line. Says Raja: "I have asked them to get it down to $ 100 or less per line." However, Raja is not bothered by the fact that BSNL's network is already choking. Each day's delay will mean that BSNL loses out to private operators.
Such things don't matter in the populous mind of Raja. If this is what the minister is planning then it is unlikely that 3G will happen even in late 2008, forget this year.
By the way, do not take Maran's name in front of Raja. A Tamil publication journalist who began asking something was shouted down by Raja.
A small piece of advice for the belligerent minister, who is otherwise an advocate. You may shout down at the media once. But, in case you are here for sometime it works both ways. After all Delhi is not Tamil Nadu where people are willing to give their lives for all kinds of otherwise nondescript politicians. It does not matter who picked you up for the post Mr Raja. Finally, it all happens on what you deliver.
One thing is clear. With this man as minister, life is going to be interesting.
P.S. I don't know whether this is something to do with DMK ministers. I was once at a conference where T R Baalu was supposed to speak. He landed on time and left on time. That was amazing for a minister. But, while leaving he did explain that he had to be on time to meet Madam!!
Roaming Freedom on BSNL
State-owned BSNL has gone ahead and slashed tariffs again. With hardly any scope to cut per minute rates, it has gone ahead and slashed roaming tariffs. The Free Roaming plan, is restricted to the post-paid subscribers of BSNL. Under this, on a Rs 550 plan, a subscriber can receive up to 300 minutes of incoming calls while roaming every month. That's a huge amount of free incoming calls. However, outgoing calls will be priced at 40 paise per minute to BSNL/MTNL subscribers and Re 1 per minute for other subscribers. Any BSNL/MTNL subscriber can opt for the new plan without any additional charges.
Obviously, the private operators will follow suit. It remains to be seen how quickly they will do so.
What is still not clear is how much revenues will BSNL lose with such a scheme. Well, so long as the scheme is restricted to post-paid subscribers, it will benefit roughly 6 million of BSNL's 28 million subscribers. But, then these are the subscribers who provide you the jam. It remains to be seen whether this scheme will result in an increased post-paid subscriber base.
As a colleague asked, when do we see free calling? Well that can and will happen provided value-added services take-off. Already voice is a commodity. Look out for the next announcement.
Obviously, the private operators will follow suit. It remains to be seen how quickly they will do so.
What is still not clear is how much revenues will BSNL lose with such a scheme. Well, so long as the scheme is restricted to post-paid subscribers, it will benefit roughly 6 million of BSNL's 28 million subscribers. But, then these are the subscribers who provide you the jam. It remains to be seen whether this scheme will result in an increased post-paid subscriber base.
As a colleague asked, when do we see free calling? Well that can and will happen provided value-added services take-off. Already voice is a commodity. Look out for the next announcement.
Thursday, May 31, 2007
Any Spicy Idea on Telecom?
There is this huge debate in the media over IDEA Cellular and Spice Telecom. There are three versions. 1) IDEA Cellular wants to pick up Spice Telecom. 2) Telekom Malaysia, which has a 49% stake in Spice Telecom wants to merge operations with IDEA 3) the last one talks of IDEA, Spice and Reliance Telecom (the GSM wing of Reliance Communications) joining hands to form a nation-wide network.
Well, the first seems to be most likely. With IDEA looking to consolidate its operation in the country, Spice would provide it a perfect fit. After all, IDEA has 14.56 million subscribers across 11 circles. Plus it has also got the licence for Mumbai and Bihar. Spice with 2.81 million subscribers in Punjab and Karnataka would be a perfect fit. But, what happens to Telekom Malaysia? Does that mean that IDEA will make way for TM in the combined entity? Is BK Modi finally getting out of telecom? He had sold off the Kolkata licence to Bharti years ago. Since then he has stuck on with these two circles.
As far as the second option is concerned, that will depend entirely on what IDEA wants to do. But, one must remember that Aditya Birla knows the Malaysians very well. After all, he had a palm oil venture there for years. In case that happens, the loser could well be Modi.
The last option is more in the realm of dreams. Yes, logically that is a possibility. In fact in the early days of telecom, there was a proposal between BPL and Bharti to joins hands to beat the competition. Nothing happened and Bharti went way ahead by acquiring other operators. Well, if Anil Ambani is looking to get back into GSM, Spice would be a great way to get back. After all, Karnataka and Punjab would provide him a great launchpad for future growth.
That may after all be the way to go.
Well, the first seems to be most likely. With IDEA looking to consolidate its operation in the country, Spice would provide it a perfect fit. After all, IDEA has 14.56 million subscribers across 11 circles. Plus it has also got the licence for Mumbai and Bihar. Spice with 2.81 million subscribers in Punjab and Karnataka would be a perfect fit. But, what happens to Telekom Malaysia? Does that mean that IDEA will make way for TM in the combined entity? Is BK Modi finally getting out of telecom? He had sold off the Kolkata licence to Bharti years ago. Since then he has stuck on with these two circles.
As far as the second option is concerned, that will depend entirely on what IDEA wants to do. But, one must remember that Aditya Birla knows the Malaysians very well. After all, he had a palm oil venture there for years. In case that happens, the loser could well be Modi.
The last option is more in the realm of dreams. Yes, logically that is a possibility. In fact in the early days of telecom, there was a proposal between BPL and Bharti to joins hands to beat the competition. Nothing happened and Bharti went way ahead by acquiring other operators. Well, if Anil Ambani is looking to get back into GSM, Spice would be a great way to get back. After all, Karnataka and Punjab would provide him a great launchpad for future growth.
That may after all be the way to go.
Thursday, May 17, 2007
Expanding coverage
Virtually everyone who is involved in India's mobile industry is looking at means to put more subscribers onto the network. The first part relates to expanding coverage. Reliance Communications has plans to hook up over 2 lakh villages. IDEA Cellular has just signed up Nokia Siemens Networks for a $ 500 million deal. The plan is to double the coverage in six of the 11 circles (basically states) in which IDEA operates currently.
Meanwhile, IDEA has already started work on setting up the network in Mumbai. But services will start only once it manages to get adequate spectrum. But, that is an altogether different story. It also has the licence for Bihar. Currently, IDEA has 14.45 million subscribers and controls 11.06% of the GSM market in India.
This is also over and above the $ 3.5 billion that market leader Bharti Airtel plans to invest in this fiscal.
Expanding networks is fine. The big need is to get more subscribers onto the network. Reliance as usual went another step ahead and launched cheap colour handsets at Rs 1,234 ($ 30). This should go along way to get a newer rung of Indians to go mobile. This time round, Reliance Communications has signed up with Chinese manufacturers like ZTE to launch phones under the Reliance Classic brand. Can Reliance now launch high-end phones using the same brand?
That could be very interesting in a market that is so price conscious. But if one is to believe what the Nokia's of the world say, the Indian consumer goes not just for price but looks at value for money. If that is the case, then this initiative of Reliance could backfire.
Meanwhile, IDEA has already started work on setting up the network in Mumbai. But services will start only once it manages to get adequate spectrum. But, that is an altogether different story. It also has the licence for Bihar. Currently, IDEA has 14.45 million subscribers and controls 11.06% of the GSM market in India.
This is also over and above the $ 3.5 billion that market leader Bharti Airtel plans to invest in this fiscal.
Expanding networks is fine. The big need is to get more subscribers onto the network. Reliance as usual went another step ahead and launched cheap colour handsets at Rs 1,234 ($ 30). This should go along way to get a newer rung of Indians to go mobile. This time round, Reliance Communications has signed up with Chinese manufacturers like ZTE to launch phones under the Reliance Classic brand. Can Reliance now launch high-end phones using the same brand?
That could be very interesting in a market that is so price conscious. But if one is to believe what the Nokia's of the world say, the Indian consumer goes not just for price but looks at value for money. If that is the case, then this initiative of Reliance could backfire.
Wednesday, May 16, 2007
Agenda for the new telecom Raja
It's official. Andimuthu Raja is the new communications and information technology minister. Among the first things he talked about soon after taking over today is extending telecom coverage to rural areas. That quite fits the bill. After all, the real growth in mobile telephony is happening in rural India.
But life is not going to be easy for Raja. That's because he has to settle many issues that are still pending. The A list includes spectrum allocation (both 2G and 3G), reduction of duties and allowing private mobile subscribers to roam on the network of state-owned Bharat Sanchar Nigam Ltd (BSNL).
The last one is an easy way to ensure that Raja can ensure deeper coverage at one go. The moment that happens, a 100 million private mobile subscribers can be mobile in rural India. But, by far the the key issue is spectrum. Defence is expected to release 42.5 Mhz of spectrum by July. The quicker the operators get spectrum, subscribers can get access to better quality services. it remains to be seen how quickly Raja can cut through the logjam. That could decide his fate.
The other issue is the high level of duties in the sector. If the duties are lowered, it will bring in an entirely new strata of people into mobile telephony. It remains to be seen whether he can convince finance minister P. Chidamabaram to agree.
Raja needs to take quick action on number portability. It has been hanging fire for close to a year. After all, that will make life a lot more better for consumers while making the operators all the more accountable.
But life is not going to be easy for Raja. That's because he has to settle many issues that are still pending. The A list includes spectrum allocation (both 2G and 3G), reduction of duties and allowing private mobile subscribers to roam on the network of state-owned Bharat Sanchar Nigam Ltd (BSNL).
The last one is an easy way to ensure that Raja can ensure deeper coverage at one go. The moment that happens, a 100 million private mobile subscribers can be mobile in rural India. But, by far the the key issue is spectrum. Defence is expected to release 42.5 Mhz of spectrum by July. The quicker the operators get spectrum, subscribers can get access to better quality services. it remains to be seen how quickly Raja can cut through the logjam. That could decide his fate.
The other issue is the high level of duties in the sector. If the duties are lowered, it will bring in an entirely new strata of people into mobile telephony. It remains to be seen whether he can convince finance minister P. Chidamabaram to agree.
Raja needs to take quick action on number portability. It has been hanging fire for close to a year. After all, that will make life a lot more better for consumers while making the operators all the more accountable.
Monday, May 14, 2007
Son rises as the Sun sets
It's bizarre. It happens only in Tamil Nadu.
You can have any kind of election exit polls. But, if a Tamil newspaper Dinakaran (that is part of the Sun group), owned by the grand nephew of Tamil Nadu chief minister and DMK chief M Karunanidhi dare does a poll on the political heir to MK, then there is serious trouble. After all, MK has three wives (one of them is dead). He has one son out of the first wife. Then there are three sons and one daughter from the second wife (Dayalu Ammal). From the third wife he has one daughter, Kanimozhi who has been declared as his literary heir.
When the poll puts, MK Stalin, way ahead of elder brother and otherwise non-entity MK Azhagiri, all hell breaks loose. Azhagiri's goons set fire to the newspaper office in Madurai. Three people die, but the state takes no action on the goons.
Yes, it asks Union communcations and IT minister Dayanidhi Maran, whose brother Kalanidhi Maran owns the Sun group to resign from the Union cabinet. That after, Dayanidhi Maran was instrumental in getting a string of telecom multinationals to invest in India and Tamil Nadu in particular.
In this case, Prime Minister Manmohan Singh has simply no power over his ministers. That's because the DMK is one of the key constituents of the ragtag that forms the UPA. Thus a otherwise successful minister has to give up his job because an old and ailing politician cannot control his errant sons. In case, Singh opposed the move, it is quite possible that the DMK will withdraw support to the government. In coalition politics, that is something that no Prime MInister would want.
So why did this happen? Well, while Karunanidhi's sons are non entities outside of Tamil Nadu, the Maran brothers had acquired almost global clout. At the end of the day, the father in Karunanidhi realised that his sons were going nowhere. So , is this a good way to remove one of the Maran brothers and teach them a lesson?
That remains to be seen. But, the big question is who will be the next communications minister? Will it be someone else from the DMK? Hopefully not Anbumani Ramadoss.
You can have any kind of election exit polls. But, if a Tamil newspaper Dinakaran (that is part of the Sun group), owned by the grand nephew of Tamil Nadu chief minister and DMK chief M Karunanidhi dare does a poll on the political heir to MK, then there is serious trouble. After all, MK has three wives (one of them is dead). He has one son out of the first wife. Then there are three sons and one daughter from the second wife (Dayalu Ammal). From the third wife he has one daughter, Kanimozhi who has been declared as his literary heir.
When the poll puts, MK Stalin, way ahead of elder brother and otherwise non-entity MK Azhagiri, all hell breaks loose. Azhagiri's goons set fire to the newspaper office in Madurai. Three people die, but the state takes no action on the goons.
Yes, it asks Union communcations and IT minister Dayanidhi Maran, whose brother Kalanidhi Maran owns the Sun group to resign from the Union cabinet. That after, Dayanidhi Maran was instrumental in getting a string of telecom multinationals to invest in India and Tamil Nadu in particular.
In this case, Prime Minister Manmohan Singh has simply no power over his ministers. That's because the DMK is one of the key constituents of the ragtag that forms the UPA. Thus a otherwise successful minister has to give up his job because an old and ailing politician cannot control his errant sons. In case, Singh opposed the move, it is quite possible that the DMK will withdraw support to the government. In coalition politics, that is something that no Prime MInister would want.
So why did this happen? Well, while Karunanidhi's sons are non entities outside of Tamil Nadu, the Maran brothers had acquired almost global clout. At the end of the day, the father in Karunanidhi realised that his sons were going nowhere. So , is this a good way to remove one of the Maran brothers and teach them a lesson?
That remains to be seen. But, the big question is who will be the next communications minister? Will it be someone else from the DMK? Hopefully not Anbumani Ramadoss.
Friday, May 4, 2007
Village connectivity
We have been hearing for years how people in India's 600,000 plus villages are bereft of a phone. Over the years, over 250,000 have been covered. But what about the rest? Who is going to fund the investment?
That's precisely the market that the first product of Nokia Siemens Networks (NSN)plans to cater to. The NSN Village Connection solution can provide cheap rural connectivity. Here the focus is on entrepreneurs in the villages. Here the entrepreneur will set up an access point that has a GSM radio, IT hardware and software solutions. This can be strapped onto anything like a TV antenna. The village access points are connected by IP links to a regional access centre. This centre is in turn hooked to the GSM network of the operator. While there are no readily available numbers, it could be set up for roughly $ 3,000 (Rs 120,000).
Under the proposed model the entrepreneur will get paid for all intra-village calls. The operator gets paid for all calls going out of the village.
While that seems to be a great way to get cheaper connectivity, there are many issues that need to be sorted out.
# How does this fit into the country's regulatory mechanism?
# Does the GSM operator provide the entrepreneur any rental?
# How will the calls that are made within the village be accounted for?
# Will there be a revenue share on these calls too?
Let's hope this initiative by NSN does not get stuck in bureaucratic legalese. After all, rural India is the next big growth market. Oh ya, NSN is currently doing pilots on this at over 10 locations in India.
That's precisely the market that the first product of Nokia Siemens Networks (NSN)plans to cater to. The NSN Village Connection solution can provide cheap rural connectivity. Here the focus is on entrepreneurs in the villages. Here the entrepreneur will set up an access point that has a GSM radio, IT hardware and software solutions. This can be strapped onto anything like a TV antenna. The village access points are connected by IP links to a regional access centre. This centre is in turn hooked to the GSM network of the operator. While there are no readily available numbers, it could be set up for roughly $ 3,000 (Rs 120,000).
Under the proposed model the entrepreneur will get paid for all intra-village calls. The operator gets paid for all calls going out of the village.
While that seems to be a great way to get cheaper connectivity, there are many issues that need to be sorted out.
# How does this fit into the country's regulatory mechanism?
# Does the GSM operator provide the entrepreneur any rental?
# How will the calls that are made within the village be accounted for?
# Will there be a revenue share on these calls too?
Let's hope this initiative by NSN does not get stuck in bureaucratic legalese. After all, rural India is the next big growth market. Oh ya, NSN is currently doing pilots on this at over 10 locations in India.
Thursday, May 3, 2007
Nokia: Catering to the next billion
Many of the Nokia global bosses were here in New Delhi. For one they had come to flag off the Nokia Express, a train with bogies painted in Nokia blue. It carries many low-cost handsets. The idea is to hook the bogies to various trains. In the process, people across India can get to see, feel and experience a Nokia phone. But, with some technical problem with the train, it could not be formally flagged off.
But, they did bring in the media and analysts from across Asia Pac. Nokia launched seven new low cost phones, six GSM and one CDMA. All are priced between Euro 35-85 (Rs 1,950-4,675. But then that is not necessarily low-cost. That's because Reliance Communications has just announced a SIM-based phone at Rs 777 ($19). Now that's real cheap.
Also many of the new phones have Internet access. Almost all off them have FM radio, flashlights, colour screen etc. Nokia's logic is that people in small towns in emerging markets are now looking at value for money and brands. That's why they will prefer Nokia phones.
With 3 billion people expected to have a mobile phone by 2007-end, up from 2 billion in September 2005, it remains to be seen how many will be using a Nokia.
But, they did bring in the media and analysts from across Asia Pac. Nokia launched seven new low cost phones, six GSM and one CDMA. All are priced between Euro 35-85 (Rs 1,950-4,675. But then that is not necessarily low-cost. That's because Reliance Communications has just announced a SIM-based phone at Rs 777 ($19). Now that's real cheap.
Also many of the new phones have Internet access. Almost all off them have FM radio, flashlights, colour screen etc. Nokia's logic is that people in small towns in emerging markets are now looking at value for money and brands. That's why they will prefer Nokia phones.
With 3 billion people expected to have a mobile phone by 2007-end, up from 2 billion in September 2005, it remains to be seen how many will be using a Nokia.
Saturday, April 28, 2007
Billion dollar profits for Bharti
While Vodafone got its green signal, market leader Bharti Airtel welcomed it with its best results ever. Annual revenues have increased 59% to Rs 18,520 crore ($ 4.5 billion*), while net profit has soared 89% to Rs 4,257 crore. ($ 1.04 billion). Bharti's profit is a shade higher than the revenues of India's fifth largest mobile player IDEA Cellular, which recorded revenues of Rs 4412.93 crore ($ 1.07 billion).
Bharti Airtel chairman and group managing director, Sunil Bharti Mittal has announced capex of $ 3.3-3.5 billion (Rs 14,000 crore plus)in 2007-'08. That's in addition to the Rs 31,950 crore that the company has already invested in the network.
Of the additional $ 3.5 billion, 70% will be invested in the mobile network. That includes setting up of 30,000 new base stations (it already has 40,000 in operation), adding more optic fibre (it already has 40,484 route kilometres). It will cover 70% of the country's population as opposed to 59% now. Of the 30,000 new base stations, around 60% (18,000) will be installed in rural areas. By then, its rural coverage will increase from the current 207,327 villages to over 300,000.
Bharti is clearly following the lower ARPU, higher volumes game. After all, it is unlikely that ARPUs will rise.
Now that Bharti has a pretty strong position in India, Mittal is looking at making a global presence. It already runs the Seychelles network. Bharti Global has been awarded licenses to operate 2G and 3G services in Jersey and Guernsey in Europe. The latest has been the acquisition of a licence to start 2G and 3G services in Sri Lanka.
But is Bharti worried about the impending challenge with the entry of Vodafone? Sunil Mittal brushed it off by simply saying: "Is that question for us or them?"
3G SPECTRUM
With communications minister Dayanidhi Maran talking about international bidders for 3G spectrum, Mittal clearly said that they are waiting for the policy. he also added that the existing operators are best positioned to offer 3G as an overlay on their existing 2-2.5G networks.
* Based on an exchange rate of Rs 41 per US dollar.
Bharti Airtel chairman and group managing director, Sunil Bharti Mittal has announced capex of $ 3.3-3.5 billion (Rs 14,000 crore plus)in 2007-'08. That's in addition to the Rs 31,950 crore that the company has already invested in the network.
Of the additional $ 3.5 billion, 70% will be invested in the mobile network. That includes setting up of 30,000 new base stations (it already has 40,000 in operation), adding more optic fibre (it already has 40,484 route kilometres). It will cover 70% of the country's population as opposed to 59% now. Of the 30,000 new base stations, around 60% (18,000) will be installed in rural areas. By then, its rural coverage will increase from the current 207,327 villages to over 300,000.
Bharti is clearly following the lower ARPU, higher volumes game. After all, it is unlikely that ARPUs will rise.
Now that Bharti has a pretty strong position in India, Mittal is looking at making a global presence. It already runs the Seychelles network. Bharti Global has been awarded licenses to operate 2G and 3G services in Jersey and Guernsey in Europe. The latest has been the acquisition of a licence to start 2G and 3G services in Sri Lanka.
But is Bharti worried about the impending challenge with the entry of Vodafone? Sunil Mittal brushed it off by simply saying: "Is that question for us or them?"
3G SPECTRUM
With communications minister Dayanidhi Maran talking about international bidders for 3G spectrum, Mittal clearly said that they are waiting for the policy. he also added that the existing operators are best positioned to offer 3G as an overlay on their existing 2-2.5G networks.
* Based on an exchange rate of Rs 41 per US dollar.
Friday, April 27, 2007
Is Essar back in the race?
So, its finally over. The Foreign Investment Promotion Board (FIPB) has given the green signal to UK-based Vodafone to acquire a 52% stake in Hutch Essar. It agreed that 15% stake controlled by Analjit Singh of Max group (7.58%) Asim Ghosh (4.68%) and IDFC (2.81%)is controlled by Indians. Hence it does not violate the government cap of 74% FDI in telecom.
Of the Essar group's 33% stake in the company, 22% is controlled by companies registered in Mauritius. With Vodafone's 52% stake that adds up to 74%. Now with the FIPB clearly stating that none of the three entities that control the 15% stake can sell their stake to a foreigner without taking the approval of the government. But that cannot happen unless the FDI norms are changed.
That means in case any of them want to exit, it can be bought by the other two. Or they need to find another Indian investor.
With the Essar group already controlling 33%, this is a clear chance for them to consolidate their holding to 48% by buying out all of the three. That definitely is a possibility that Arun Sarin and Vodafone would not want. After all, big comma is well known to have a 100% control on almost all the operations. Knowing the ambitions that the Ruias have and the their current cash flush position, I would not be surprised to see them make an offer to the trio. When? That remains to be seen.
But I am sure, most telecom scribes in Delhi are quite happy that Voda has finally got the FIPB green signal. After all, one cannot keep having three stories a day on the same company from three different correspondents for three months in a row.
Of the Essar group's 33% stake in the company, 22% is controlled by companies registered in Mauritius. With Vodafone's 52% stake that adds up to 74%. Now with the FIPB clearly stating that none of the three entities that control the 15% stake can sell their stake to a foreigner without taking the approval of the government. But that cannot happen unless the FDI norms are changed.
That means in case any of them want to exit, it can be bought by the other two. Or they need to find another Indian investor.
With the Essar group already controlling 33%, this is a clear chance for them to consolidate their holding to 48% by buying out all of the three. That definitely is a possibility that Arun Sarin and Vodafone would not want. After all, big comma is well known to have a 100% control on almost all the operations. Knowing the ambitions that the Ruias have and the their current cash flush position, I would not be surprised to see them make an offer to the trio. When? That remains to be seen.
But I am sure, most telecom scribes in Delhi are quite happy that Voda has finally got the FIPB green signal. After all, one cannot keep having three stories a day on the same company from three different correspondents for three months in a row.
3G soap opera
The Department of Telecommunications (DoT) feels that there should just four 3G service providers in the 2.1 Ghz band in any circle. However, with 40 Mhz of spectrum being available, it is clearly possible to allocate 5 Mhz each for all the seven big mobile service providers (BSNL/MTNL, Bharti, Hutch Essar, Reliance, IDEA, Tata Teleservices and Aircel). By charging Rs 1,500 crore per operator, the government can make a neat Rs 12,000 crore at one go.
There is also talk that DoT wants to provide 10 Mhz to four operators. Of this one of them will be BSNL/MTNL.
Telecom industry officials point out that under the Universal Access Service Licence (UASL)the existing operators can provide video and data services, which is anyway 3G.
More importantly, former telecom regulator, Pradip Baijal had admitted that 3g is a continuum of 2G services.
This according to telecom experts could be construed as a back-door entry for MVNOs. All the companies that either quit India or missed out on the India experience are looking to make a splash here now.
But if the government does go about inviting international players to bid for the 3G licence, then we could see a replay of the unending court battles against the launch of wireless in local loop (WLL) services. Only this time it could be bloodier as all the Indian operators will be together.
There is also talk that DoT wants to provide 10 Mhz to four operators. Of this one of them will be BSNL/MTNL.
Telecom industry officials point out that under the Universal Access Service Licence (UASL)the existing operators can provide video and data services, which is anyway 3G.
More importantly, former telecom regulator, Pradip Baijal had admitted that 3g is a continuum of 2G services.
This according to telecom experts could be construed as a back-door entry for MVNOs. All the companies that either quit India or missed out on the India experience are looking to make a splash here now.
But if the government does go about inviting international players to bid for the 3G licence, then we could see a replay of the unending court battles against the launch of wireless in local loop (WLL) services. Only this time it could be bloodier as all the Indian operators will be together.
Thursday, April 26, 2007
Maran's 3G googly
Communications minister Dayanidhi Maran has fired the latest salvo in the battle for 3g spectrum. By allowing international players to bid for 3G spectrum, Maran has turned the tables on the existing mobile operators. That means the big mobile operators can plonk in the cash and get spectrum while Indian operators could be left salivating for spectrum.
However, like all things Indian, it will not be as simple as it seems. That's because the Cellular Operators Association of India (COAI) and the Association of Unified Telecom Service Providers of India (AUSPI) have joined hands to fight the phoren hand. After all, the existing operators have already invested a lot of money on the ground to make mobile telephony what it is today.
Second, with the big players coming, Indian operators will need to pay a much higher fee to get the spectrum. Going by the initial TRAI recommendations, a pan-India 3G licence would come for a base price of Rs 1130 crore. But, this googly could spoil their balance sheets for a long time to come.
Also, none of the global players is expected to go deep into the country. They will restrict themselves to the big cities.
That leaves a lot of questions unanswered.
# What happens if Indian operators do not manage to get 3G spectrum?
# Is that the end of the road for these players?
# Will there be enough takers for 3G services in India?
# Can an existing operator join hands with an international operator to start 3G services as a separate service?
# Is this the formal entry of MVNO services in India?
I hope to clarify most of these over the next couple of days.
However, like all things Indian, it will not be as simple as it seems. That's because the Cellular Operators Association of India (COAI) and the Association of Unified Telecom Service Providers of India (AUSPI) have joined hands to fight the phoren hand. After all, the existing operators have already invested a lot of money on the ground to make mobile telephony what it is today.
Second, with the big players coming, Indian operators will need to pay a much higher fee to get the spectrum. Going by the initial TRAI recommendations, a pan-India 3G licence would come for a base price of Rs 1130 crore. But, this googly could spoil their balance sheets for a long time to come.
Also, none of the global players is expected to go deep into the country. They will restrict themselves to the big cities.
That leaves a lot of questions unanswered.
# What happens if Indian operators do not manage to get 3G spectrum?
# Is that the end of the road for these players?
# Will there be enough takers for 3G services in India?
# Can an existing operator join hands with an international operator to start 3G services as a separate service?
# Is this the formal entry of MVNO services in India?
I hope to clarify most of these over the next couple of days.
Monday, April 23, 2007
Mixed band trials: Another tussle
The CDMA based mobile operators are all set to start 3G trials in the 1900 Mhz band. The aim of this trial is to see if CDMA services in this band will interfere with mobile services offered by the GSM players. This move could lead to the next round of the 3G spectrum wars.
That's because the GSM-based operators have all along claimed that CDMA services in the 1900 Mhz band will interfere with 3G services in the 21.Ghz band. Within hours of the news being public, T.V. Ramachandran, director general of the Delhi-based Cellular Operators Association of India (COAI) has shot off a seven-page letter to telecom secretary D.S. Mathur.
So, the battle for 3G spectrum seems to have begun in earnest all over again. Ramachandran claims that the DoT has allowed a trial for the mixed band without involving the GSM industry.
Considering that the GSM camp has always opposed the mixed band plan, this move could result in the entire issue going to court. But, then that is not something new in the Indian telecom industry. With China planning to roll-out 3G services under the TD-SCDMA standard later this year, it is high time the government and the telecom companies come to a tacit understanding on 3G services. Or else, it will be one more case where India waits while the world goes way ahead.
That's because the GSM-based operators have all along claimed that CDMA services in the 1900 Mhz band will interfere with 3G services in the 21.Ghz band. Within hours of the news being public, T.V. Ramachandran, director general of the Delhi-based Cellular Operators Association of India (COAI) has shot off a seven-page letter to telecom secretary D.S. Mathur.
So, the battle for 3G spectrum seems to have begun in earnest all over again. Ramachandran claims that the DoT has allowed a trial for the mixed band without involving the GSM industry.
Considering that the GSM camp has always opposed the mixed band plan, this move could result in the entire issue going to court. But, then that is not something new in the Indian telecom industry. With China planning to roll-out 3G services under the TD-SCDMA standard later this year, it is high time the government and the telecom companies come to a tacit understanding on 3G services. Or else, it will be one more case where India waits while the world goes way ahead.
Monday, April 16, 2007
Moto pulls out: Fast track ahead for BSNL
Last month, state-owned Bharat Sanchar Nigam Ltd (BSNL) added close to 2 million new mobile subscribers. The monthly mobile subscriber additions at BSNL should rise substantially over the next few months. That's because US-based Motorola has withdrawn the case it filed six months ago challenging its disqualification from BSNL's $ 5 billion tender for 63 million mobile lines.
Now, the two lowest bidders--Sweden-based Ericsson and Finland's Nokia will roll-out the 45 million lines. An 18 million line contract has already been awarded to France's Alcatel that has a technology sharing agreement with state-owned ITI. Ericsson will roll-out 60% of the 45 million lines, while the balance goes to Nokia.
Motorola officials claim that they withdrew the case simply because it was hurting the consumer. Plus it wanted to retain a good relationship with BSNL. Obviously, its not as simple as that. Motorola officials were not surprisingly unwilling to comment whether there was any other reason behind the sudden change in stance.
BSNL, currently the third largest mobile operator will soon be in a position to threaten the top two mobile operators--Bharti Airtel and Reliance Communications. As of end-March, Bharti leads with 37.14 million subscribers followed by Reliance with 33.82 million. BSNL has 27.42 million. That ranking could change substantially by the year-end. That will be the immediate fallout of Motorola withdrawing the case.
BSNL is India's largest telecom company with a presence in 21 of the 23 circles. It is not present in Delhi and Mumbai, where the other state-owned Mahanagar Telephone Nigam Ltd (MTNL) is present.
Now, the two lowest bidders--Sweden-based Ericsson and Finland's Nokia will roll-out the 45 million lines. An 18 million line contract has already been awarded to France's Alcatel that has a technology sharing agreement with state-owned ITI. Ericsson will roll-out 60% of the 45 million lines, while the balance goes to Nokia.
Motorola officials claim that they withdrew the case simply because it was hurting the consumer. Plus it wanted to retain a good relationship with BSNL. Obviously, its not as simple as that. Motorola officials were not surprisingly unwilling to comment whether there was any other reason behind the sudden change in stance.
BSNL, currently the third largest mobile operator will soon be in a position to threaten the top two mobile operators--Bharti Airtel and Reliance Communications. As of end-March, Bharti leads with 37.14 million subscribers followed by Reliance with 33.82 million. BSNL has 27.42 million. That ranking could change substantially by the year-end. That will be the immediate fallout of Motorola withdrawing the case.
BSNL is India's largest telecom company with a presence in 21 of the 23 circles. It is not present in Delhi and Mumbai, where the other state-owned Mahanagar Telephone Nigam Ltd (MTNL) is present.
Thursday, April 12, 2007
Growth continues
With 6.13 million new additions in March 2007, country's GSM subscriber base has hit 121.43 million. That's a 5.32% increase over the last month figure of 115.29 million subscribers. During the month, the lead was set by state-owned Bharat Sanchar Nigam Ltd (BSNL)which added 1.98 million subscribers. Following it was Bharti Airtel with 1.70 million new subscribers and Hutch Essar with 1.09 million.
During the month, the pressure was maintained by leading CDMA operator Reliance Communications that added 1.2 million subscribers. That's a neat 7.33 million new subscribers in a month without accounting for the additions by Tata Teleservices. However, one must remember that the biggest additions in every fiscal are in March, coinciding with the end of the fiscal year for operators.
Not surprisingly, the sharpest growth was in the C circles that grew by 8.73%. B circles grew grew by 6.66% followed by A circles at 4.82%. the metros grew by just 2.99%. Among the states, Assam grew 12.44% followed by North-East (11.16%) and Rajasthan (11.13%).
During the month, the pressure was maintained by leading CDMA operator Reliance Communications that added 1.2 million subscribers. That's a neat 7.33 million new subscribers in a month without accounting for the additions by Tata Teleservices. However, one must remember that the biggest additions in every fiscal are in March, coinciding with the end of the fiscal year for operators.
Not surprisingly, the sharpest growth was in the C circles that grew by 8.73%. B circles grew grew by 6.66% followed by A circles at 4.82%. the metros grew by just 2.99%. Among the states, Assam grew 12.44% followed by North-East (11.16%) and Rajasthan (11.13%).
Thursday, March 29, 2007
More hurdles for Vodafone
If Vodafone chief executive Arun Sarin thought his biggest problem lay in getting the Ruia brothers who control 33% in Hutch Essar to agree, he is sadly mistaken. Despite graduating from IIT Kharagpur, he seems to have forgotten about the power of the Indian bureaucracy. That's clearly visible as the Foreign Investment Promotion Board (FIPB), the Reserve Bank of India, the law and commerce ministries want to know clear details on the shareholding in Hutch Essar.
The problem relates to the 15% held by Hutch Essar managing director Asim Ghosh, Max India's Analjit Singh and the IDFC in Hutch Essar. Under the government of India norms,foreign investment in telecom is capped at 74%. Vodafone has picked up Hutchison Telecommunication International Ltd (HTIL)52%. Of the 33% held by the Essar group, 22% is brought in from Mauritius. That itself adds up to 74%.
Hutch officials claim it has a 52% stake in the company but an economic interest of 67% including the equity held by Ghosh, Singh and IDFC. Now, where has that come from? The FIPB has sought details from Ghosh on how he funded the acquisition of the stake. That should be interesting.
But, what one must remember is that Hutch has all along violated the foreign investment norms. So, what can Vodafone do now? For starters it could convince the Ruia brothers to move the 22% holding from Mauritius to India. But, that will cost money. Will the Vodafone board agree? This once should prove interesting.
The problem relates to the 15% held by Hutch Essar managing director Asim Ghosh, Max India's Analjit Singh and the IDFC in Hutch Essar. Under the government of India norms,foreign investment in telecom is capped at 74%. Vodafone has picked up Hutchison Telecommunication International Ltd (HTIL)52%. Of the 33% held by the Essar group, 22% is brought in from Mauritius. That itself adds up to 74%.
Hutch officials claim it has a 52% stake in the company but an economic interest of 67% including the equity held by Ghosh, Singh and IDFC. Now, where has that come from? The FIPB has sought details from Ghosh on how he funded the acquisition of the stake. That should be interesting.
But, what one must remember is that Hutch has all along violated the foreign investment norms. So, what can Vodafone do now? For starters it could convince the Ruia brothers to move the 22% holding from Mauritius to India. But, that will cost money. Will the Vodafone board agree? This once should prove interesting.
Thursday, March 15, 2007
Vodafone Essar it is
Finally it has been done. Essar vice-chairman Ravi Ruia and Vodafone chief executive Arun Sarin have agreed to work together. What does it all mean:
# the company will be called Vodafone Essar, but services will be on the Vodafone brand.
# Ravi Ruia will be chairman and Arun Sarin will be the vice-chairman
# the management team will be led by Asim Ghosh
# it is still awaiting approval of the Foreign Investment Promotion Board (FIPB), which should be done in the next couple of weeks
# the Ruias can sell their 33% stake over the next four years to Vodafone for $ 5 billion
# the Ruias will have four members on the 12-member board
Sarin wants Vodafone Essar to be India's # 1 mobile company by 2010 with a 20-25% market share. After all, as we start, Vodafone Essar is the third largest in the Vodafone empire after the United States and Germany. Sarin was at his aggressive best, while Ravi Ruia seemed a mellowed person.
All that sounds great. But, then how long will Sarin's honeymoon with the Ruias continue? That could simply decide whether this venture emerges as India's leading mobile service provider. Keep checking.
An aside: Sarin's Hindi is quite anglicised despite being in India till he completed his IIT!!
Wednesday, March 14, 2007
Nokia India unspooled
After nearly a year of total silence, Finnish giant Nokia came up with a Strategy Sharing Session (SSS) in Chennai. The idea was to meet up with the new management team, plus a look at the manufacturing facility. The new team comprises D Shivakumar, VP & MD, Nokia India; Devinder Kishore, director marketing; Sunil Dutt, director sales; GK Chakrapani, country GM, enterprise solutions; Vineet Taneja, director multimedia; Vipul Sabharwal, director channel & retail.
So here's a quick update on what happened to Nokia India during 2006.
One, India emerged as Nokia's third biggest after China and the US as opposed to being the fourth largest market in 2005. At Euro 2.71 billion, India accounts for 6.6% of Nokia's global revenues of Euro 41.12 billion. Two, the Nokia manufacturing facility at Sriperumbudur near Chennai made 25 million handsets during 2006. Roughly 30% of these phones were exported to nine South-East Asian and eight Middle East and African countries. 2007 should see half the production being exported. Going by a quick back of the envelope calculation, the plant can manufacture close to 75 million handsets a year. It remains to be seen how quickly it ramps up to that level.
Three, the man who set up the manufacturing facility--Jukka Lehtela a Nokia hand for 23 years has gone back to Finland. He has been replaced by Sachin Saxena. The floor space of the plant is being increased from the current 30,000 square metres to 53,000 square metres.
So what handsets do they make here? Well, the big mystery is over for now. Currently, the Indian plant cranks out 10 largely low-end models. This includes the 1100i/1110/1110i/1112/1600/2310/2600/2610/2626/6030.
With over 3,800 employees at the plant, Nokia provides jobs to around 6,000 people in India. Ahead of India are obviously Finland, the United States and China. Around 70% of the 3,800 employees at the Chennai plant are women.
Eight vendors are setting up component plants within the Nokia complex. Work is currently on at the facilities of Perlos, Salcomp and Jabil Circuit. All the eight should be up and running by early 2008.
Globally Nokia has classified its phones under four categories. The Explore range is the N Series that lets users discover a whole new set of uses. The Live category is for those whom a mobile phone is a style statement. Then the Active series (largely E Series) which allow the users to increase their productivity. Last is the Connect series. These have simple features and are usually marked for the first time users.
So here's a quick update on what happened to Nokia India during 2006.
One, India emerged as Nokia's third biggest after China and the US as opposed to being the fourth largest market in 2005. At Euro 2.71 billion, India accounts for 6.6% of Nokia's global revenues of Euro 41.12 billion. Two, the Nokia manufacturing facility at Sriperumbudur near Chennai made 25 million handsets during 2006. Roughly 30% of these phones were exported to nine South-East Asian and eight Middle East and African countries. 2007 should see half the production being exported. Going by a quick back of the envelope calculation, the plant can manufacture close to 75 million handsets a year. It remains to be seen how quickly it ramps up to that level.
Three, the man who set up the manufacturing facility--Jukka Lehtela a Nokia hand for 23 years has gone back to Finland. He has been replaced by Sachin Saxena. The floor space of the plant is being increased from the current 30,000 square metres to 53,000 square metres.
So what handsets do they make here? Well, the big mystery is over for now. Currently, the Indian plant cranks out 10 largely low-end models. This includes the 1100i/1110/1110i/1112/1600/2310/2600/2610/2626/6030.
With over 3,800 employees at the plant, Nokia provides jobs to around 6,000 people in India. Ahead of India are obviously Finland, the United States and China. Around 70% of the 3,800 employees at the Chennai plant are women.
Eight vendors are setting up component plants within the Nokia complex. Work is currently on at the facilities of Perlos, Salcomp and Jabil Circuit. All the eight should be up and running by early 2008.
Globally Nokia has classified its phones under four categories. The Explore range is the N Series that lets users discover a whole new set of uses. The Live category is for those whom a mobile phone is a style statement. Then the Active series (largely E Series) which allow the users to increase their productivity. Last is the Connect series. These have simple features and are usually marked for the first time users.
Saturday, March 10, 2007
It's 200 million subscribers now
February has been the fifth month of adding 6 million more new mobile subscribers. Not surprisingly, the GSM guys added 4.87 million, while the CDMA guys added 1.15 million. So, India has 154 million mobile phone subscribers. Add on the fixed lines and we have more than 200 million telephone subscribers.
Now that's not what the analysts have been saying.I clearly remember meeting a Yankee Group analyst nearly a year ago who was quite convinced that India will soon slip from adding 5 million subscribers a month. "You guys are simply scraping the bottom of the barrel," is what he said. That was a year ago. Today we are adding 6 million plus a month without a glitch. Mind you, the dispute over state-owned Bharat Sanchar Nigam Ltd's (BSNL) tender for 60 million lines is yet to be sorted.
Ironically, most of the global analysts land up in India with pre-conceived notions about the country, its poverty, lack of infrastructure etc. So how will poor people go ahead and buy a phone, then pay for services every month? How will an operator make money?
Well, you can pick up a second/third-hand mobile phone from the streets of any major city for around Rs 900 ($20). Yet you can pay this off in easy instalments spread over a year. Two, tariffs are at Re 1 a minute. With schemes like the Life Time Mobile you can keep receiving calls without making a call for six months. available that's not an issue. Also, while Bharti and Hutch are profitable, the world's largest mobile company by revenues, Vodafone is in the red. No wonder Voda is here in India on its own finally.
So guys, the real thing that you don't know sitting in cubicles across the Pacific is that Indians love to talk. Also, with literacy levels being where they are, it makes eminent sense to have a mobile phone as opposed to an Internet-enabled PC. Two, with incomes rising, a whole new set of people are getting connected. Three, Indians learnt about recycling long before the West. So a mobile phone is passed down from the bread winner to his wife and then on to the driver and the servant.
So, do we head to seven million new connections a month? I won't be surprised if that happens by the end of 2007.
Now that's not what the analysts have been saying.I clearly remember meeting a Yankee Group analyst nearly a year ago who was quite convinced that India will soon slip from adding 5 million subscribers a month. "You guys are simply scraping the bottom of the barrel," is what he said. That was a year ago. Today we are adding 6 million plus a month without a glitch. Mind you, the dispute over state-owned Bharat Sanchar Nigam Ltd's (BSNL) tender for 60 million lines is yet to be sorted.
Ironically, most of the global analysts land up in India with pre-conceived notions about the country, its poverty, lack of infrastructure etc. So how will poor people go ahead and buy a phone, then pay for services every month? How will an operator make money?
Well, you can pick up a second/third-hand mobile phone from the streets of any major city for around Rs 900 ($20). Yet you can pay this off in easy instalments spread over a year. Two, tariffs are at Re 1 a minute. With schemes like the Life Time Mobile you can keep receiving calls without making a call for six months. available that's not an issue. Also, while Bharti and Hutch are profitable, the world's largest mobile company by revenues, Vodafone is in the red. No wonder Voda is here in India on its own finally.
So guys, the real thing that you don't know sitting in cubicles across the Pacific is that Indians love to talk. Also, with literacy levels being where they are, it makes eminent sense to have a mobile phone as opposed to an Internet-enabled PC. Two, with incomes rising, a whole new set of people are getting connected. Three, Indians learnt about recycling long before the West. So a mobile phone is passed down from the bread winner to his wife and then on to the driver and the servant.
So, do we head to seven million new connections a month? I won't be surprised if that happens by the end of 2007.
Wednesday, March 7, 2007
Hutch Essar shareholding: a big mystery
Arun Sarin is all set to add India to Vodafone's footprint. But, how much of Hutch Essar has Vodafone actually picked up? Going by the 11 February press releases of Vodafone and Hutch Essar, it has picked up a 67% stake. That's fine. But, government of India norms clearly stipulate that foreign invest in telecom should be restricted to 74%.
The catch is that of the 33% equity that Essar has, 22% is routed through Mauritius-based Essar Communications. That effectively means the foreign investment is 89% and not 74%.
Now, that has obviously raised a hue and cry in a country where telecom security is considered to be a major issue. Already Telecom Watchdog, a Delhi-based NGO has filed a public interest litigation (PIL) in the Delhi High Court. Rajeev Chandrasekhar, former owner of Mumbai's BPL Mobile and now Member of Parliament in the Rajya Sabha (upper house) has flagged it off in Parliament.
Meanwhile, the Foreign Investment Promotion Board (FIPB) and the ministries of finance and commerce are seeking details on the shareholding pattern.
The nub of it all is the 12.31% held by Analjit Singh, Hutch Essar managing director Asim Ghosh. Both Ghosh and Singh have in separate letters to the FIPB that these shares are held by them individually.
But, if that is so, how can Vodafone say it has picked up 67% in Hutch Essar? Or is there more to it than what we can see?
It's time Vodafone's Sarin and the Essar Ruias come out clean on the current shareholding pattern. But, then this nothing new with Hutch.
Right from when Analjit Singh sold off part of his stake in then Hutchison Max there have been murmurs on who really controlled the company. Now that the Chinese are out of hit, hopefully the Brits will come out clean.
That's the least that one can expect from the world's largest mobile company by revenues.
The catch is that of the 33% equity that Essar has, 22% is routed through Mauritius-based Essar Communications. That effectively means the foreign investment is 89% and not 74%.
Now, that has obviously raised a hue and cry in a country where telecom security is considered to be a major issue. Already Telecom Watchdog, a Delhi-based NGO has filed a public interest litigation (PIL) in the Delhi High Court. Rajeev Chandrasekhar, former owner of Mumbai's BPL Mobile and now Member of Parliament in the Rajya Sabha (upper house) has flagged it off in Parliament.
Meanwhile, the Foreign Investment Promotion Board (FIPB) and the ministries of finance and commerce are seeking details on the shareholding pattern.
The nub of it all is the 12.31% held by Analjit Singh, Hutch Essar managing director Asim Ghosh. Both Ghosh and Singh have in separate letters to the FIPB that these shares are held by them individually.
But, if that is so, how can Vodafone say it has picked up 67% in Hutch Essar? Or is there more to it than what we can see?
It's time Vodafone's Sarin and the Essar Ruias come out clean on the current shareholding pattern. But, then this nothing new with Hutch.
Right from when Analjit Singh sold off part of his stake in then Hutchison Max there have been murmurs on who really controlled the company. Now that the Chinese are out of hit, hopefully the Brits will come out clean.
That's the least that one can expect from the world's largest mobile company by revenues.
Tuesday, March 6, 2007
Hutch Essar shareholding
It's quite possible that the acquisition of Hutch-Essar by Vodafone could get delayed. That's because a lot of questions are being asked about the shareholding pattern in Hutch-Essar. On one side Hutch is talking of selling it's 67% stake in Hutch-Essar. That's 52% held by Hutchison directly and another 15% held by Asim Ghosh and Analjit Singh. But, on the other hand, the 74% foreign equity in Hutch Essar is accounted for by Hutch's 52% and Essar's 22% through Mauritius.
Now that makes the maths all the more complicated. So, is the foreign stake in Hutch Essar at 74% or 89%? That's what the Delhi High Court will hear based on a public interest litigation (PIL) filed by consumer group Telecom Watchdog's Prashant Bhushan. He is categorical that Hutch Essar's licence is liable to be cancelled. Or, the 15% shares should be confiscated.
But if one jogs one's memory, the shareholding pattern of Hutchison Max (as it was called in the mid-90s) was always suspect. So can one expect any action on Hutch Essar? Seems unlikely.
But, in case the entire issue meanders its way through court, operators like Bharti and IDEA Cellular will gain. BSNL is still stuck in its expansion plans thanks to the case filed by Motorola.
So, who is behind Telecom Watchdog? That could decide how long this case will continue.
Now that makes the maths all the more complicated. So, is the foreign stake in Hutch Essar at 74% or 89%? That's what the Delhi High Court will hear based on a public interest litigation (PIL) filed by consumer group Telecom Watchdog's Prashant Bhushan. He is categorical that Hutch Essar's licence is liable to be cancelled. Or, the 15% shares should be confiscated.
But if one jogs one's memory, the shareholding pattern of Hutchison Max (as it was called in the mid-90s) was always suspect. So can one expect any action on Hutch Essar? Seems unlikely.
But, in case the entire issue meanders its way through court, operators like Bharti and IDEA Cellular will gain. BSNL is still stuck in its expansion plans thanks to the case filed by Motorola.
So, who is behind Telecom Watchdog? That could decide how long this case will continue.
Monday, March 5, 2007
$ 19 billion investment
According to the communications ministry, over the last 24 months, the Indian telecom and IT industry has received foreign investment worth $ 19.2 billion across 36 projects. All the big names are already here--be it Nokia, Motorola, Ericsson, Alcatel Lucent, Cisco, Qualcomm, Samsung, LG, Flextronics, Jabil Circuit and Foxconn. There are a many more in the race to set up either a manufacturing facility or a software development centre. Some have both.
Interestingly, a large chunk of these investments are in and around Chennai. It does help that communications minister Dayanidhi Maran is from Chennai.
Could this be the beginning of India emerging as a manufacturing base for telecom and IT companies? Seems likely at this stage. Plus, there are three projects to make semiconductor chips being planned around Hyderabad. The big advantage is the number of jobs that have been generated in Chennai. While a large chunk will be for tech-savvy people, it has opened up avenues for all allied services in and around these factories. This is one initiative that many ministers could emulate in their constituencies.
Interestingly, a large chunk of these investments are in and around Chennai. It does help that communications minister Dayanidhi Maran is from Chennai.
Could this be the beginning of India emerging as a manufacturing base for telecom and IT companies? Seems likely at this stage. Plus, there are three projects to make semiconductor chips being planned around Hyderabad. The big advantage is the number of jobs that have been generated in Chennai. While a large chunk will be for tech-savvy people, it has opened up avenues for all allied services in and around these factories. This is one initiative that many ministers could emulate in their constituencies.
20 million broadband subscribers
We are again in the season for setting targets. While the 250 million telecom subscribers by end-2007 now seems quite reachable, communications minister Dayanidhi Maran has come up with a new one. This time it is broadband: 9 million subscribers by the year-end and 20 million by 2010.
All that sounds nice. But it is far easier to achieve a mobile phone target than a broadband target. One, with about 25-30% illiteracy in India, it is easy to talk on a phone, but using a broadband connection is a totally different ball game. I for one am quite pessimistic on the 9 million target for this year itself. Something in the region of 6 million is achievable, but 9 million is stretching it a bit too far. But then if ministers do not set targets then what will industry do?
Ok, Maran says that based on technologies like WiMax coming in. But, it is still early days as far as WiMax is concerned. Will HSPA go way ahead by the time WiMax finally settles down? That's something that operators would love to know. Personally I believe that Indian mobile operators should simply junk 3G and go straight for HSPA. After all there are at least over a 100 HSPA networks globally now.
All that sounds nice. But it is far easier to achieve a mobile phone target than a broadband target. One, with about 25-30% illiteracy in India, it is easy to talk on a phone, but using a broadband connection is a totally different ball game. I for one am quite pessimistic on the 9 million target for this year itself. Something in the region of 6 million is achievable, but 9 million is stretching it a bit too far. But then if ministers do not set targets then what will industry do?
Ok, Maran says that based on technologies like WiMax coming in. But, it is still early days as far as WiMax is concerned. Will HSPA go way ahead by the time WiMax finally settles down? That's something that operators would love to know. Personally I believe that Indian mobile operators should simply junk 3G and go straight for HSPA. After all there are at least over a 100 HSPA networks globally now.
Thursday, February 22, 2007
Fabricating chips in India
India's communication and IT minister Dayanidhi Maran has been lobbying for quite sometime. Finally, just before the Union Budget, he seems to have convinced fellow Tamilian and finance minister P Chidambaram on the need to provide incentives for setting up semiconductor fabs in the country. So for a Rs 2,500 crore ($ 555 million) investment in a fabrication facility, the investor will get a 25% capital subsidy for the first 10 years. In case the fab is located in a special economic zone (SEZ), it works out to 20%.
The subsidy also applies to investments of Rs 1,000 crore in manufacturing liquid crystal displays (LCD), organic light emitting diodes (OLED), plasma display panels (PDP), storage devices, photovoltaics, nano technology products.
So does this mean that there will be a rush to set up units? That will depend on how the incentives here compare to that in other parts of the world. It ranges for 30% to 90%. It would still be sometime before an Intel actually comes here. After all, they can still cater to the Indian market from locations abroad.
But then these incentives are over and above what the various state governments offer them. It is estimated that these incentives should bring in investment worth $ 10 billion over the next three years.
The subsidy also applies to investments of Rs 1,000 crore in manufacturing liquid crystal displays (LCD), organic light emitting diodes (OLED), plasma display panels (PDP), storage devices, photovoltaics, nano technology products.
So does this mean that there will be a rush to set up units? That will depend on how the incentives here compare to that in other parts of the world. It ranges for 30% to 90%. It would still be sometime before an Intel actually comes here. After all, they can still cater to the Indian market from locations abroad.
But then these incentives are over and above what the various state governments offer them. It is estimated that these incentives should bring in investment worth $ 10 billion over the next three years.
New goalposts for BSNL
Now that the tamasha over Vodafone seems to have ebbed, the focus is on state-owned Bharat Sanchar Nigam Ltd (BSNL). Communications minister Dayanidhi Maran has drawn out a road map for BSNL. That includes:
* Double BSNL's turnover to $ 20 billion over the next three years
* Add 3 million mobile subscribers every month from Jan 2008 to December 2010
* Add 500,000 broadband connections every month from Jan 2008
* Develop PCOs as One-Stop centres
* Improve ARPUs through newer service streams
Obviously, the pressure will be on the new chairman of BSNL. That's because current chairman, AK Sinha will leave at the end of July 2007. While adding 3 million subscribers could just be possible considering that Bharti is already adding 1.75 million subscribers every month. Revenues will also increase. But what beats me is how will he ensure that ARPUs go up.
Let's see what else Maran sets as targets for BSNL.Or is it that by then, he would have merged BSNL and MTNL?
* Double BSNL's turnover to $ 20 billion over the next three years
* Add 3 million mobile subscribers every month from Jan 2008 to December 2010
* Add 500,000 broadband connections every month from Jan 2008
* Develop PCOs as One-Stop centres
* Improve ARPUs through newer service streams
Obviously, the pressure will be on the new chairman of BSNL. That's because current chairman, AK Sinha will leave at the end of July 2007. While adding 3 million subscribers could just be possible considering that Bharti is already adding 1.75 million subscribers every month. Revenues will also increase. But what beats me is how will he ensure that ARPUs go up.
Let's see what else Maran sets as targets for BSNL.Or is it that by then, he would have merged BSNL and MTNL?
Wednesday, February 21, 2007
We need a bigger share
Now that Arun Sarin has come and gone, the Ruia brothers of Essar are showing their true colours. Well, they want a 50% stake in the venture with "Big Comma." After all, Essar has been cherishing the thought of having a say in the mobile business.
But Vodafone is not the type that believes in such things. Globally, it has close to a 100% stake in all the ventures. However, in India it is hamstrung by government policy that ensures that it can hold only 74%. It is unlikely that it will go lower than that.
So what does that leave the Ruias with? Simply hope that Vodafone will pay them more to acquire their 33% stake in the venture.
That raises another question? Now that Vodafone is here, will the other biggies follow suit? That remains to be seen.
But Vodafone is not the type that believes in such things. Globally, it has close to a 100% stake in all the ventures. However, in India it is hamstrung by government policy that ensures that it can hold only 74%. It is unlikely that it will go lower than that.
So what does that leave the Ruias with? Simply hope that Vodafone will pay them more to acquire their 33% stake in the venture.
That raises another question? Now that Vodafone is here, will the other biggies follow suit? That remains to be seen.
Friday, February 16, 2007
Vodafone enters India
India-born Arun Sarin has ensured that Vodafone is in India. Almost two months after Hong Kong-based Hutchison Telecommunications decided to get out of its Indian operations--Hutch Essar--the deal is done at an enterprise valuation of $ 18.8 billion.
So has Voda paid too much for an entry into India? Well, it ends up paying $ 11.1 billion for a 67% stake in the venture. It will also get $ 1.62 billion from the sale of its 5.6% stake in India's biggest mobile operator Bharti Tele-Ventures. That's a neat $ 9.46 billion. But, that fits into Voda's EMAPA strategy. After all it has got out of Japan and Sweden in the past year and a half.
But, what could be end up being an issue later for Vodafone is that the Essar group has decided to remain in the venture. That's fine for now. Issues are likely to crop up once the big expansion plans are rolled out. Will Essar be in a position to fund it on a continuous basis remains to be seen.
The big thing to look out for over the next 12 months will be the battle for leadership. Can Vodafone overtake Bharti? That remains to be seen. But for now, it is a good time to be a mobile subscriber in India.
One advantage that is being touted is that Vodafone has acquired a company that has the highest ARPUs in India at Rs 374 ($ 8.3). But, as of now, it does not have a presence in the C circles (states). Once Vodafone enters these circles, see ARPUs coming down to the national average. That's because ARPUs in these circles are way below the national average of Rs 335.
One must remember that Vodafone should have learnt in the last 18 months how Bharti works. That could be leveraged to compete effectively against it. But Bharti is itself no pushover. The battle lines are drawn for the biggest battle ever in Indian mobile telephony.
Wednesday, January 24, 2007
3G: Will it ever take-off?
I was at GSM> 3G in Mumbai. Not surprisingly, the focus was on what else but 3G.
Where is 3G headed? Forget emerging markets, 3G has yet to really happen in Europe.
As far as Indian operators are concerned, they are still waiting for spectrum. The biggest mobile market, China too does not have 3G as yet. That's because the Chinese government is looking at starting 3G services on an entirely new standard, the TD-SCDMA (Time Division-Synchronous Code Division Multiple Access). It believes that there is no reason for it to to follow the western standard--WCDMA. Maybe.
That leaves just Europe where 3G is happening. Even within Europe, 3G is still being used as a voice service as opposed to a data service. According to a survey, in the UK, 49% of 3G subscribers did not use their mobile phone even once for video telephony. In Europe, only Italy has 10% of its subscribers on 3G. Other nations fall in the 1-5% range. Only Japan has over 10% of its mobile subscribers using 3G, as opposed to possessing a 3G enabled handset.
So where does that leave 3G in India?
It's definitely going to take a long, long time before Indian subscribers actually start using 3G services. Use of 3G for data services could take even longer. That will depend on how services are priced. That in turn depends on how the bidding for spectrum goes. If prices for spectrum go through the roof, then you can simply forget all about people using high-cost 3G services in India. The other issue is the cost of 3G enabled mobile phones. In a market that prefers $ 20 handsets, it will take a while before a dent can be made in high-end phones.
But despite all the negatives on 3G, operators in emerging markets have launched 3G services. The list includes Telkomsel (Indonesia), Globe (Philippines) and Dialog (Sri Lanka).
What is clearly evident is that the big winners in 3G are the vendors more than the operators. After all, people end up buying high-end handsets with a plethora of features that they never, ever use. So even if the operators lose out, the vendors are raking it in.
Where is 3G headed? Forget emerging markets, 3G has yet to really happen in Europe.
As far as Indian operators are concerned, they are still waiting for spectrum. The biggest mobile market, China too does not have 3G as yet. That's because the Chinese government is looking at starting 3G services on an entirely new standard, the TD-SCDMA (Time Division-Synchronous Code Division Multiple Access). It believes that there is no reason for it to to follow the western standard--WCDMA. Maybe.
That leaves just Europe where 3G is happening. Even within Europe, 3G is still being used as a voice service as opposed to a data service. According to a survey, in the UK, 49% of 3G subscribers did not use their mobile phone even once for video telephony. In Europe, only Italy has 10% of its subscribers on 3G. Other nations fall in the 1-5% range. Only Japan has over 10% of its mobile subscribers using 3G, as opposed to possessing a 3G enabled handset.
So where does that leave 3G in India?
It's definitely going to take a long, long time before Indian subscribers actually start using 3G services. Use of 3G for data services could take even longer. That will depend on how services are priced. That in turn depends on how the bidding for spectrum goes. If prices for spectrum go through the roof, then you can simply forget all about people using high-cost 3G services in India. The other issue is the cost of 3G enabled mobile phones. In a market that prefers $ 20 handsets, it will take a while before a dent can be made in high-end phones.
But despite all the negatives on 3G, operators in emerging markets have launched 3G services. The list includes Telkomsel (Indonesia), Globe (Philippines) and Dialog (Sri Lanka).
What is clearly evident is that the big winners in 3G are the vendors more than the operators. After all, people end up buying high-end handsets with a plethora of features that they never, ever use. So even if the operators lose out, the vendors are raking it in.
Wednesday, January 17, 2007
BSNL growth is stuck for now
The contentious case of state-owned Bharat Sanchar Nigam Ltd (BSNL) tender for 60 million GSM lines is still stuck in court. Unless this case is settled, there is no way that BSNL can go ahead and expand. As things stand, it's network capacity is almost full.
That's great news for the private mobile operators who are adding on a huge number of subscribers. While BSNL added just 643,350 subscribers, Bharti Airtel added 1.71 million and Hutchison Essar added 1.03 million. Despite the poor show by BSNL, the country added over 4.64 million GSM subscribers in December.
In the run-up to 250 million subscribers, the Department of Telecommunications had estimated that BSNL would account for half the 250 million subscribers. Today it has just 67 million of the country's 189 million telecom subscribers (both mobile and fixed). It will take a Herculean effort for BSNl to get back into the race and add another 60 million subscribers by the end of the year. So, it remains to be seen what magic BSNL can do in court so that it can get down to the job of providing phone connections.
That's great news for the private mobile operators who are adding on a huge number of subscribers. While BSNL added just 643,350 subscribers, Bharti Airtel added 1.71 million and Hutchison Essar added 1.03 million. Despite the poor show by BSNL, the country added over 4.64 million GSM subscribers in December.
In the run-up to 250 million subscribers, the Department of Telecommunications had estimated that BSNL would account for half the 250 million subscribers. Today it has just 67 million of the country's 189 million telecom subscribers (both mobile and fixed). It will take a Herculean effort for BSNl to get back into the race and add another 60 million subscribers by the end of the year. So, it remains to be seen what magic BSNL can do in court so that it can get down to the job of providing phone connections.
Friday, January 12, 2007
The iphone has arrived
After months of debate, it is finally there--the iphone from Apple. It will be available on the Cingular network in the US. The design is mind blowing. So you have the first mobile phone without a key pad. No stylus too. And a big, big screen. Now isn't that what mobile users have been waiting for. At $ 499 it is definitely expensive. But, by the time it arrives in India, prices will be definitely lower.
The iphone is a three-in-one device. It is a phone, an iPod and you can surf the web While the Gang of four--Nokia, Motorola, Sony Ericsson and Samsung--are still silent, I am sure we'll see clones of the iphone by the end of 2007. After all, this is one product that could affect their bottomlines.
But, despite the hype, Steve Jobs will have to battle it out with router company Cisco Systems to use the name. That's because Cisco owns the trademark iphone after it acquired Infogear in 2000. Irrespective of what happens, one thing is clear: this in one product that will change the way the world talks.
The iphone is a three-in-one device. It is a phone, an iPod and you can surf the web While the Gang of four--Nokia, Motorola, Sony Ericsson and Samsung--are still silent, I am sure we'll see clones of the iphone by the end of 2007. After all, this is one product that could affect their bottomlines.
But, despite the hype, Steve Jobs will have to battle it out with router company Cisco Systems to use the name. That's because Cisco owns the trademark iphone after it acquired Infogear in 2000. Irrespective of what happens, one thing is clear: this in one product that will change the way the world talks.
Wednesday, January 10, 2007
The boom continues
The Indian mobile growth saga continues. In December, 4.64 million new GSM subscribers signed up. Add to that 1.4 million CDMA subscribers for Reliance Communications. That's the third month in a row that over 6 million subscribers have been added on. However, the Tata Teleservices (CDMA) numbers are still not available.
Now, India's GSM subscriber base is at 105.42 million. Of that Bharti Airtel accounts for 32 million. State-owned BSNL is behind at 23.36 million followed closely by Hutch Essar at 23.31 million subscribers. During the month, Bharti Airtel added 1.71 million subscribers, while Hutch Essar added 1.03 million subscribers. Reliance Communications too added a million subscribers across CDMA and GSM.
Among the circles, Assam recorded the highest growth at 9.22%. That's double of the national average of 4.6%.
The GSM subscriber base has shot up by 46.92 million during the year, an increase of 80.2% pver December 2005 base of 58.5 million.
Now, India's GSM subscriber base is at 105.42 million. Of that Bharti Airtel accounts for 32 million. State-owned BSNL is behind at 23.36 million followed closely by Hutch Essar at 23.31 million subscribers. During the month, Bharti Airtel added 1.71 million subscribers, while Hutch Essar added 1.03 million subscribers. Reliance Communications too added a million subscribers across CDMA and GSM.
Among the circles, Assam recorded the highest growth at 9.22%. That's double of the national average of 4.6%.
The GSM subscriber base has shot up by 46.92 million during the year, an increase of 80.2% pver December 2005 base of 58.5 million.
Will bid in two weeks: Sarin
Arun Sarin, CEO Vodafone is in Delhi for a day-long visit. He met up with commerce minister Kamal Nath and communications minister Dayanidhi Maran. Yes, he did meet Bharti Airtel's Sunil Mittal. What he did confirm was that Vodafone would put in its bid for Hutch Essar over the next couple of weeks.
He did not rule out partnering with the Essar group. That would ensure that Vodafone does not violate the government norms of 76% FDI in the telecom sector. (Essar has a 33.01% stake in Hutch Essar. However, 22% is through a company abroad.) Vodafone's entry could spoil the party for Anil Ambani's Reliance Communications.
He did not rule out partnering with the Essar group. That would ensure that Vodafone does not violate the government norms of 76% FDI in the telecom sector. (Essar has a 33.01% stake in Hutch Essar. However, 22% is through a company abroad.) Vodafone's entry could spoil the party for Anil Ambani's Reliance Communications.
Tuesday, January 9, 2007
Vodafone in the final lap
Anil Ambani's Reliance Communications is almost out of the race to acquire Hutch Essar. It will be Vodafone that ends up picking Hutch Essar. As things stand, Vodafone is looking at acquiring a 76% stake. However, the catch is that it wants the balance 24% to be widely distributed among Indian shareholders. That's tricky because government norms specify that a significant partner should hold a 10% stake in the venture. That's something that Vodafone does not want. All this is part of its global strategy of full control.
The other thing that Vodafone wants is remote control over the telecom network. This is again something that is not allowed under Indian rules. It has roped in the European Union trade commissioner Peter Mandelson to talk to Indian commerce minister Kamal Nath. This is quite on the lines of what Nath did during Lakshmi Niwas Mittal's battle to acquire Vodafone Arcelor.
Vodafone CEO Arun Sarin is in Delhi to meet prime minister Manmohan Singh, communications minister Dayanidhi Maran and commerce minister Kamal Nath.
However, though it seems now that Essar is also on the sidelines, it could change the game by going to court. That will be to the benefit of Reliance Communications, Bharti Airtel and Essar. The losers will be Hutchison and Vodafone.
Apart from this, the only problem that Sarin will have to contend with is the entry of the Hinduja family into the race. For them money is not a problem. Also, the next generation Hindujas are very tech savvy. As already mentioned before, the battle could be finalised within the territorial limits of the UK.
The other thing that Vodafone wants is remote control over the telecom network. This is again something that is not allowed under Indian rules. It has roped in the European Union trade commissioner Peter Mandelson to talk to Indian commerce minister Kamal Nath. This is quite on the lines of what Nath did during Lakshmi Niwas Mittal's battle to acquire Vodafone Arcelor.
Vodafone CEO Arun Sarin is in Delhi to meet prime minister Manmohan Singh, communications minister Dayanidhi Maran and commerce minister Kamal Nath.
However, though it seems now that Essar is also on the sidelines, it could change the game by going to court. That will be to the benefit of Reliance Communications, Bharti Airtel and Essar. The losers will be Hutchison and Vodafone.
Apart from this, the only problem that Sarin will have to contend with is the entry of the Hinduja family into the race. For them money is not a problem. Also, the next generation Hindujas are very tech savvy. As already mentioned before, the battle could be finalised within the territorial limits of the UK.
Monday, January 8, 2007
Voda's at the doorstep
Looks like the battle for Hutch Essar is being coordinated out of the United Kingdom. That's because while Vodafone is based out of Newbury, the Hinduja brothers are in London.
The big question is how many partners will Voda bring to the table.
I guess, Voda finally realised that there is no way that it can get a higher stake in Bharti Airtel. Globally Voda has a controlling stake in most markets. So much so, it has a 100% stake in 15 of the 27 markets it operates in. But it has yet to make a mark in two of the biggest mobile markets. It has 10% in Bharti Airtel and only a 3.3% share in China Mobile. It pulled out of the Japanese operations in 2005. So, out of the four biggest mobile telecom markets, Voda is there only in the United States.
But, irrespective of what Vodafone wants, under DOT norms it can have a maximum of 74% equity in the venture. The rest has to come from Indian investors. Going by that, Vodafone could pick up 51% in the venture while letting Essar increase its stake to 49%. That's what Essar has been wanting to do for a long time. But, that could lead to the next round of battles with Essar, something that Hutchison has had to face for awhile.
Also, Vodafone could get a lot of support from Bharti Airtel. That's because Vodafone will be just as big as Hutch Essar is now. However, if Reliance Communications picks up Hutch Essar the competition could simply overwhelm it. There is talk that Bharti Airtel could even agree to an infrastructure sharing arrangement with Vodafone.
Similarly, the Hindujas are flush with cash. They had also operated the Gujarat licence, Fascel before selling to Hutchison. It had only recently sold its 5.11% stake in Hutch Essar for $ 450 million.
With the focus shifting to Vodafone, the pressure is beginning to tell on Reliance Communications, the Mumbai based telco that is looking to make it to the top of the Indian mobile sweepstakes. if newspaper reports are to be believed, it is willing to pick up a 10% stake in Hutch Essar. However, that does nothing for Anil Ambani, who is looking to operate and control a nation-wide GSM network.
It's time for Arun Sarin-headed Vodafone to flex its muscles. After all his team is checking out on the intricacies of Indian law with the babus in Sanchar Bhawan.
The big question is how many partners will Voda bring to the table.
I guess, Voda finally realised that there is no way that it can get a higher stake in Bharti Airtel. Globally Voda has a controlling stake in most markets. So much so, it has a 100% stake in 15 of the 27 markets it operates in. But it has yet to make a mark in two of the biggest mobile markets. It has 10% in Bharti Airtel and only a 3.3% share in China Mobile. It pulled out of the Japanese operations in 2005. So, out of the four biggest mobile telecom markets, Voda is there only in the United States.
But, irrespective of what Vodafone wants, under DOT norms it can have a maximum of 74% equity in the venture. The rest has to come from Indian investors. Going by that, Vodafone could pick up 51% in the venture while letting Essar increase its stake to 49%. That's what Essar has been wanting to do for a long time. But, that could lead to the next round of battles with Essar, something that Hutchison has had to face for awhile.
Also, Vodafone could get a lot of support from Bharti Airtel. That's because Vodafone will be just as big as Hutch Essar is now. However, if Reliance Communications picks up Hutch Essar the competition could simply overwhelm it. There is talk that Bharti Airtel could even agree to an infrastructure sharing arrangement with Vodafone.
Similarly, the Hindujas are flush with cash. They had also operated the Gujarat licence, Fascel before selling to Hutchison. It had only recently sold its 5.11% stake in Hutch Essar for $ 450 million.
With the focus shifting to Vodafone, the pressure is beginning to tell on Reliance Communications, the Mumbai based telco that is looking to make it to the top of the Indian mobile sweepstakes. if newspaper reports are to be believed, it is willing to pick up a 10% stake in Hutch Essar. However, that does nothing for Anil Ambani, who is looking to operate and control a nation-wide GSM network.
It's time for Arun Sarin-headed Vodafone to flex its muscles. After all his team is checking out on the intricacies of Indian law with the babus in Sanchar Bhawan.
Friday, January 5, 2007
Voda's Blues__to bid or not to bid
UK-based Vodafone is flush with cash. But, should it pay $ 21 billion to get a slice of India's booming mobile market?
One, it already has a 10% stake in Bharti Airtel. It could make a killing by selling off the stake it picked up for $ 1.5 billion (Rs 6,700 crore) in October 2005. Now it needs the approval of Bharti's Sunil Mittal before it acquires Hutchison Essar. That does not seem too difficult.
The real issue is can Arun Sarin justify the high price of the acquisition to picky Vodafone shareholders. Considering that Vodafone has just got out of the mess it went into after acquiring Germany's Mannesmann for $ 202 billion in 2000, that could be a rough call.
However, Vodafone officials are already doing the rounds of New Delhi's Sanchar Bhawan, home to the Department of Telecommunications.
Even if it does manage to acquire all of Hutchison Essar, it will have to dilute 26% of the equity to Indian shareholders. (India caps FDI in telecommunications at 76%). The other way round would be to align with Essar. That could be an issue in the not-too-distant future. Hutchison has had major problems with Essar.
How quickly will Vodafone move? That could be the decider.
One, it already has a 10% stake in Bharti Airtel. It could make a killing by selling off the stake it picked up for $ 1.5 billion (Rs 6,700 crore) in October 2005. Now it needs the approval of Bharti's Sunil Mittal before it acquires Hutchison Essar. That does not seem too difficult.
The real issue is can Arun Sarin justify the high price of the acquisition to picky Vodafone shareholders. Considering that Vodafone has just got out of the mess it went into after acquiring Germany's Mannesmann for $ 202 billion in 2000, that could be a rough call.
However, Vodafone officials are already doing the rounds of New Delhi's Sanchar Bhawan, home to the Department of Telecommunications.
Even if it does manage to acquire all of Hutchison Essar, it will have to dilute 26% of the equity to Indian shareholders. (India caps FDI in telecommunications at 76%). The other way round would be to align with Essar. That could be an issue in the not-too-distant future. Hutchison has had major problems with Essar.
How quickly will Vodafone move? That could be the decider.
Wednesday, January 3, 2007
Battle for Hutch Essar
It's the third week of the tussle for Hutchison Essar, India's fourth largest mobile service provider. By now, the race is restricted to homegrown Reliance Communications and UK-based Vodafone. The enterprise value of Hutchison Essar has been on the rise. It's gone up from $ 12 billion in early December to $ 21 billion in January.
It's payback time for the Ruia brothers--Shashi and Ravi--who have had serious financial problems over the last few years. This is when their 33.01% stake in the venture could get them anything between $ 5 billion (Rs 22,500 crore) to $ 7 billion (Rs 31,500 crore). For a group that was virtually wiped out a few years back, that's will be an unbelievable come-back.
The best part is that Essar can sell-out, buy up Hutchison's 67 per cent stake or simply sit back and watch the fun as the world rushes in to buy up Hutchison Essar.
In case Essar decides not to sell, it ensures that Reliance is out of the race. Under the Department of Telecommunications norms, no telecom company can have more than 10% stake in two operators in a circle (basically a state). The only way out is to pick up a 100% stake.
Considering that rivalry that Essar had with the undivided Reliance group, that may be an option. But, since the Essar fight was with Reliance patriarch Dhirubhai Ambani and Mukesh Ambani, letting Anil get his share would be a way to settle scores. That, of course remains to be seen.
It's payback time for the Ruia brothers--Shashi and Ravi--who have had serious financial problems over the last few years. This is when their 33.01% stake in the venture could get them anything between $ 5 billion (Rs 22,500 crore) to $ 7 billion (Rs 31,500 crore). For a group that was virtually wiped out a few years back, that's will be an unbelievable come-back.
The best part is that Essar can sell-out, buy up Hutchison's 67 per cent stake or simply sit back and watch the fun as the world rushes in to buy up Hutchison Essar.
In case Essar decides not to sell, it ensures that Reliance is out of the race. Under the Department of Telecommunications norms, no telecom company can have more than 10% stake in two operators in a circle (basically a state). The only way out is to pick up a 100% stake.
Considering that rivalry that Essar had with the undivided Reliance group, that may be an option. But, since the Essar fight was with Reliance patriarch Dhirubhai Ambani and Mukesh Ambani, letting Anil get his share would be a way to settle scores. That, of course remains to be seen.
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