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.

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?

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.

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.