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.
Thursday, March 29, 2007
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.
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