regulators - Information Gatekeepers Inc.

Some of the issues covered this week include:
• Regulations Obstruct India's Telecoms Growth
• Idea to Acquire Regional Operator
• BSNL to add Lines
• Reliance to offer Global Telephony Soon
• Excess Bandwidth Being Dumped in India
• AT&T may offload 33% Stake in Idea
• Ten Million Broadband users by 2010
REGULATORS
Regulations obstructing India’s telecom growth
According to Gartner, India will need to remove some more regulatory
restrictions to create a competitive environment for the Indian telecom sector.
Although tariffs of voice-based services have fallen in the last two years, prices
are still not competitive with other markets. The voice quality of India’s telecom
services is very poor when compared to developed markets. Gartner has
evaluated the telecom services on the following parameters: choice of carriers,
pricing and service quality. For a full competition environment, the research
agency has stated that the market would require at least three major service
providers, competitive pricing and service quality comparable to world standards.
Gartner believes that for the sector to become competitive, India must have at
least three service providers with an extensive footprint across the country.
Carrier access codes must be implemented so that users can choose their
preferred carrier while making domestic and long distance calls.
Bharti’s M&A plans deferred
Bharti Tele-Venture’s acquisition plans have been hindered because the
government has not yet given a green signal for raising the cap on foreign direct
investment in the telecom sector. Norms for intra-circle mergers are yet to be
finalized. The company, which had plans to start acquiring smaller mobile players
in March, has now postponed its plans to the middle of this year.
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Bharti gets license for 5 more circles
Bharti Tele-Ventures has now got an official license for providing cellular
services in five more circles namely West Bengal, Uttar Pradesh (East),
Andaman and Nicobar, Bihar, Orissa, and Jammu and Kashmir. The new
licenses will expand Bharti’s footprint in the country according to Sunil Bharti
Mittal, chairman of Bharti Tele-Ventures Ltd. Bharti currently provides services in
15 mobile and 5 fixed line circles. The license for Rajasthan is also expected
soon. As on Jan 31st 2004, Bharti had 587,872 fixed-line customers and 5.86
million mobile subscribers.
DoT to hive off engineering centre
The Department of Telecom (DoT) will hive off its Telecom Engineering
Centre (TEC into two separate entities. TEC is responsible for providing telecom
technical support and advice to the government to ensure the smooth functioning
of the Indian telecom sector. Without its permission, no operator can set up a
telecom network in India.
One entity of TEC will be merged with state-owned telecom company, Bharat
Sanchar Nigam (BSNL), to deal with network engineering, type approval and
generic requirements.
The other entity will be an autonomous institute called Telecom & Multimedia
Standards Institute (TMSI) which would deal with standards relating to
information, communication and entertainment electronics. TMSI will set
standards for networks and services, provide specifications for next generation
products and offer technical support to the telecom regulators and to the
Telecom Disputes Settlement Appellate Tribunal.
Grey market of handsets will cost the state $2.2 million
The Gujarat government will lose an amount of $2.2 million in sales tax
over the next five years due to the flourishing gray market for mobile phone
handsets in the state. According to Indian Cellular Association (ICA), about 75%
of handsets are sold in the gray market in Gujarat, and have demanded abolition
of the octroi duty. To avoid paying octroi duty, products are sold to the customers
in the gray market without any warranty or after-sales service. There are around
13 million cellular phone subscribers in Gujarat and are expected to grow to
double of this by 2007. Due to the octroi duty imposed by the local authorities,
there is a loss of around $2.2 million in the sales tax collections of the
government. If the octroi duty on mobile handsets is removed, the sales tax
revenue in the state of Gujarat will grow by 280% by 2007.
Final document on unified licensing regime by February end
TRAI is to bring out a consultation paper regarding unification of telecom
services, it is likely to be done by the end of February. The regulator has already
issued a preliminary consultation paper on the Unified Licensing Regime. The
regime covers all communication services including national, international long
distance telephony services and satellite services. The preliminary consultation
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paper had invited comments from stakeholders in the telecom industry to enable
final sheet preparation. The issues addressed in the consultation paper were
regarding the type of unified licensing services, entry and license fees and some
other issues.
XL Telecom Moves Court against MTNL
MTNL recently launched the tender for CDMA handsets, and has landed
into trouble over it. One of the bidders, XL Telecom that represents Kyocera is
moving court against MTNL. The purchase order for the bid was awarded to ITI,
for Hyundai handsets and XL has challenged the order saying that the handsets
to be provided by ITI are not technically compliant with the tender specifications.
On opening the bids, Kyocera had bid the lowest, and ITI, the second lowest, and
after some techno-commercial negotiations, ITI was awarded the purchase order.
Lowest license fees for Bengal and Andaman Nicobar
Bharti Tele-Ventures (BTVL) has paid the lowest-ever license fee of $
221,000 for offering mobile services in Bengal and Andaman and Nicobar
Islands. A total amount of $1.4 million was paid by Bharti to the department of
telecommunications (DoT) to receive the unified access licence for offering
mobile services in the five circes; Bihar Bengal, Orissa, Andaman and Nicobar,
Jammu and Kashmir and Uttar Pradesh (East). The license fee paid by the
company was $ 1 million for Uttar Pradesh (East), $0.22 million for Bihar,
$0.11million for Orissa and $442,000 for Jammu and Kashmir.
WIRELESS
Idea to acquire another regional mobile player
Idea Cellular, a mobile service provider promoted by Tata, Birla and
AT&T, expects to acquire a regional mobile service provider in 2004. The
company is looking to expand its footprint across India. The news about its
acquisition plans comes soon after Idea’s acquisition of Escotel - the deal was
valued at around $254 million.
Idea is evaluating the proposal of coming out with an initial public offering which
would fund the company’s acquisitions and market expansion plans.
Idea hopes to record revenues of $288-310 million for the financial year ending
March 2004 and another $77 million coming from Escotel.
Reliance launches its pre-paid service
With almost 80% of India’s mobile market subscribing to pre-paid services,
Reliance Infocomm’s entry into the pre-paid market is sure to result in a
phenomenal growth in its subscriber base. The company estimates that with its
Reliance India Mobile (RIM) pre-paid service, its subscriber base across seven
circles in the country will touch 10 million in the next four months. Within 9
months of launching its mobile services in India, Reliance has garnered a 20%
market share with a customer base of 6.3 million.
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The RIM pre-paid service will be available with six different handsets and six
schemes. At the entry level, a Motorola C131 handset will be available for around
$77 with a free prepaid connection. There would be rechargeable vouchers valid
for 6 months worth about $72. At the high-end, the Samsung SCA603 handset
will be available for around $485.
With a view to capture users in the low-end rural markets, Reliance has also
launched its pre-paid services in parts of northern India.
Ericsson gets $400 mn order from Bharti
Bharti Tele-Ventures has placed an order worth $400 million for telecom
equipment with Ericsson. Ericsson’s three-year agreement would entail providing
network planning and optimization services. According to Bharti, at least $300
million of the funds would be arranged at a 4% annual interest by EKN, a
Swedish export credit agency. The company plans to raise over $500 million
from the international markets, in the next financial year, to expand its networks
and refinance earlier loans. Bharti, India’s largest GSM-based mobile service
provider with a footprint in 15 circles out of India’s 23 circles, has a 20% market
share with 6 million subscribers. The company is set to expand its services in six
more circles. Singapore Telecommunications Ltd has a 28% stake in the
company.
Expansion plans for Cable & Wireless in India
Cable & Wireless plans to expand its operations in India and increase its
employee head count to more than 120. The company expects a 50% growth in
its turnover, currently pegged at around $50 million, over the next one year. As
part of its expansion plans, Cable & Wireless will strengthen its relationships with
key players in the Indian telecommunications market and could even set up a
BPO centre. The company has tied-up with Reliance Infocomm to extend its
global data network into India.
Nokia to Pilot launch EDGE services for IDEA Cellular
Nokia has been chosen by IDEA Cellular to pilot EDGE services, which
are three times faster than those delivered over GPRS. Nokia has provided GSM
/ EDGE hardware in more than 35 countries and to more than 60 customers.
Nokia has been giving services to IDEA since 1996, for their GSM infrastructure.
According to Vikram Mehmi, CEO of IDEA Cellular, providing EDGE services is
another step in providing next generation technology, to its subscribers, and
making their GSM experience more value-added. The IDEA network is now
100% EDGE compatible and is all set to launch this service in Delhi.
BSNL to add more lines
BSNL will add almost 300, 000 mobile telephone lines additionally to the
present 330,000 lines via WLL in Tamilnadu. The installation work is in progress
and expected to be completed by April 2004. The chief general manager of
BSNL, Mr. Mahadevan has said that Base Telephone Stations (BTS) of BSNL
would be increased to 745 from the present 334 and would cover 145 towns in
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the State. The new BTS will provide clearer signal facilities compared to the
previous ones, it is scheduled to be completed by June.
Mobile First seeks Vodafone and T mobile alliance
MobileFirst alliance operators which include Spice, BPL, Escotel (bought
over by Idea) and RPG (which is now a part of Aircel ) are seeking alliance with
global companies Vodafone and T-Mobile according to chairman of Spice, B K
Modi. Idea supports MobileFirst on various issues, but not a part of the alliance.
MobileFirst companies have no major strategic foreign operators, while they have
foreign investors like AIG. Companies like T-Mobile, Vodafone and DoCoMo
have begun showing interest in India, MobileFirst has about 3.5 million
subscribers, across the country.
BUSINESS
Reliance to soon offer telephony globally
Reliance Infocomm will soon offer telecom services globally. Once the
company’s India operations have stabilized and once the Flag Telecom
acquisition is completed, it will start rolling out its telecom services in other
countries. Flag Telecom will play an important role in these plans as it has a
50,000 km under-sea cable network across Asia, Europe and the US. Reliance
would bid for global licences only for markets which have a potential to offer large
scales of operation. The company is eyeing markets in west and south Asia. In
India, Reliance will continue to focus on large deals which include group
connections for major companies. Reliance Infocomm president, S P Shukla, has
stated that the company would like to become one of the top ten telecom
companies in the world.
Aggressive marketing plans by Motorola for India
Motorola’s plans to aggressively push its mobile handsets in the Indian
market include the launch of 10 new handset models, expansion of its sales,
services and distribution network, and rock-bottom pricing for entry level phones.
According to Gartner, Motorola is currently India’s fourth largest selling mobile
handset brand, including both GSM and CDMA phones. Globally the company is
the second largest handset player. With India’s mobile market set to add
between 20-25 million new users, Motorola sees a huge opportunity to grow its
market in the country. Nokia is the largest player in India, followed by Samsung
and LG. Globally Nokia occupied the number one position with 33.6% market
share in 2003.
Aggressive pan-India expansion plans for Tata Tele
Tata Teleservices will invest $700 million by March 2005 to add 10 million
lines across its 11 new circles and six existing ones. Project Moonwalk will see
the company adding capacity to its existing circles, while Project Blue Sky will
take care of the expansion plans in the new circles. As a result of its expansion
plans, Tata Tele will create 20,000 new jobs in the industry, 10,000 of which are
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likely to be outsourced. The company currently employs 5,500 employees. Tata
Teleservices has a subscriber base of about 1.5 million in its existing circles of
operation.
India a part of BiCSi, an international telecom organization
India has joined the Building Industry Consulting Service International
(BiCSi). BiCSi is an international independent body which conducts programs to
help its members keep abreast with the latest networking and telecom issues.
The organization has over 100 members from the structured cabling and telecom
industry. At the inauguration of the BiCSi India district, D-Link’s Vikas Pinjarkar
was appointed as the District Chair while Ketan Kothari of Sigma Byte was
elected as District Secretary.
BiCSi will conduct the ‘Registered
Communications Distribution Designer’ exam for the first time in India. This would
be useful for those responsible for the design, integration and implementation of
telecommunications transport systems.
Bharti to announce equipment contracts worth $400 mn
Bharti is soon expected to announce equipment contracts worth $400-500
million for AirTel, its cellular business. The company’s main vendors will be
Ericsson, Motorola and Siemens. Ericsson is expected to be the biggest
beneficiary garnering about $250 million of the business. Apart from providing
equipment, the company hopes to get contracts to operate, maintain and
upgrade Bharti’s networks. Ericsson is already supplying equipment to Bharti in
10 circles. The existing networks as well as the new ones will be EDGE capable
to allow for high speed data and video on mobiles.
SIFY to tie up with Perfetti Van Melle
Sify Enterprise Solutions (SES), of Sify Ltd, a leading internet,
eCommerce and networking company, has announced its association with
Perfetti Van Melle India (PVMI) for providing networking services for Sify’s
important applications like business critical messaging, SAP and data transfer
systems. According to a press release SES will be managing the networking
solutions of PVMI.
Excess bandwidth being dumped in India
According to the Indian Space Research Organisation (ISRO), foreign
satellites are dumping their excess transponder capacity in India. Some reports
suggest that ISRO bandwidth rates are about 50% higher than the rates currently
available. Foreign satellites are ready to connect VSAT operators with their
excess capacity, but are getting caught up with the government rules, which
specify use of Indian satellites.
Reliance to use LMDS solution from Alvarion
Reliance Infocomm Ltd. will be using Alvarion’s WALKair LMDS solution to
complement their CDMA access network in India. The Alvarion solution will be
deployed by Reliance in the major Indian cities within the next two years,
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equipment worth $2.5 million has already been shipped by Alvarion. According
to Tzvika Friedman of Alvarion, the use of BWA technology as a cost-effective
and flexible complement to the cellular and wireline networks is now being
recognized and appreciated, the world over.
International roaming from BSNL
BSNL will be providing international roaming on its cellular network. BSNL
has tied up with international operators across 160 countries. The tariff per
minute for these calls would be around $1.6. There are plans of introduction of
out-bound roaming services in Tamilnadu.
The SMS service from BSNL has also gone international, earlier this was limited
within India.
Metro Ethernet launched
Bharti Televentures’ landline arm, Touchtel has introduced Metro
Ethernet, which enables carrying huge data within a metro city. This is a major
technological breakthrough for IT and ITES companies according to Touchtel
officials. The company is getting enthusiastic response from companies like
Cognizant, Verizon and Vetri who have already signed up for the Metro Ethernet.
The capacity could be in the range of 10 mbps to 100 mbps through an optic fiber
line, and the scale-up can be done very fast. Touchtel’s Metro Ethernet offers a
minimum of 10 mbps capacity, which is upgradable in multiples of 10 mbps,
within a few hours. The annual cost, is around $ 10,000 and there is no limit on
the distance.
Landline for Internet telephony
DLink has come out with a two-in-one VoIP phone that can also work like
a landline phone. An extra fitting is a green button which when selected takes
the user to a service provider like HCL, Sify, or any other ISP and, one can
directly dial the US or any overseas number to get connected. It would cost about
$0.5 per minute to make the call from the landline and a mobile call would cost
about $0.35 per minute, whereas with the VoIP phone, the cost is about $0.13
per minute. Five thousand pieces have already been shipped by the company in
India and overseas.
MTNL provides the best value for money on pre-paid
MTNL’s prepaid service, Trump offers its customers the best value for
money. The prepaid segment contributes to more than 70% of the GSM services
market. A comparison of the tariff structures of the five mobile operators in Delhi
has indicated that the talk time offered by MTNL is higher than that offered by
any other operator. According to Mr. Sinha of MTNL, there will be additional
capacity of 1,20,000 subscribers each in Mumbai and Delhi.
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FINANCIAL NEWS
AT&T may offload 33.3% stake in Idea
The Indian partners of Idea Cellular, Tatas and Birlas, have been
informally informed that AT&T Wireless will not make any more investments in
the cellular company and may offload its stake of 33.3%. Other than China, Asia
was no longer a priority market for AT&T.
Idea is scheduled to soon come out with an initial public offering (IPO) of $221265 million, of which 90% will be fresh shares and 10% could be an offer of sale
by the promoters. AT&T could offload only part of its stake through the IPO as
the market regulators, SEBI, do not allow for a wholesale exit within a year of an
IPO. It is likely that the Tatas and Birlas may buy out AT&T’s stake in Idea.
However no decision has been taken yet.
Data Access to raise $22 mn via public offer
Data Access (India) Ltd will raise $22 million through a 100% book-built
initial public offer (IPO) to expand and upgrade its international long distance
telephone network. Data Access is India’s second largest international long
distance telecom service provider with over 30% market share. The company
operates several telecommunications licenses for voice, data and broadcasting
services in India, the United Kingdom, United States and Sri Lanka. Post the
IPO, the public would hold 26% of the company’s shareholding, 57% of the
equity would be held by SPA Enterprises, PCCW would hold 16%, while
employees would have 1%. Data Access will offer 50 million new shares. The
paid up equity will be $33 million with a face value of 22 cents per share.
BSNL’s arrears piling up
BSNL has suffered a loss of about $26 million in 2002-03, according to
the Comptroller and Auditor General (CAG) of India. Due to non-collection of bills
for telephone services, BSNL has incurred arrears of about $59 million. The
Mahanagar Telephone Nigam Ltd (MTNL) has also been pulled up by CAG for its
poor performance in the cellular services sector. According to the report by
CAG, BSNL must review its planning mechanism and introduce a method for
recovery of compensation. However, BSNL’s arrears have come down from $80
million in 2001-02 to $26 million in 2002-03. MTNL has failed in proper planning
of its cellular network, tackling problems in the billing system and fraud bookings
by franchisees, resulting in a loss of $0.68 million.
IDEA Cellular will decide on IPO within 2 weeks
IDEA Cellular will decide within 2 weeks, whether to come out with an
initial public offering (IPO) within two weeks, according to company officials.
IDEA is a joint venture of Tata, Birla and AT&T and has recently acquired
Escotel. IDEA Cellular is also looking at some regional telecom operators for
acquisition. The company requires funds for its future plans, for the next three
years. The amount required would be to the tune of $37 million, which will be
raised through internal accruals and debt. Earlier reports had indicated that the
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IPO could be in the range of $22 million. About 10% could be a sale offer from
the promoters and the remaining 90% by an issue of shares.
VSNL eyes acquisition of Tata Power’s broadband business
VSNL is eyeing the acquisition of Tata Power company’s broadband
business. Tata group owns 45% stake in the VSNL. According to industry
sources this acquisition will help invigorate the broadband and Internet offerings
of VSNL. The possible move is in proper sync with VSNL’s offerings, as it will
augment the optimization of broadband services like distance education, movies,
and video streaming. Earlier VSNL had announced acquisition of Dishnet’s
digital subscriber line and Internet business. Tata Power has recently renamed
its broadband business company to Tata Power Broadband Company.
MARKET INTELLIGENCE
10 mn broadband users by 2010
According to a report by the CII broadband committee, India is likely to
have between 10-30 million broadband subscribers by 2010. The report, which is
scheduled to be finalized next month, will make recommendations for the
country’s broadband policy. The recommendations will include short and longterm steps required to be taken for the broadband market. CII’s report, titled
'India's broadband vision 2010', is being supported by the departments of IT and
telecom, and the market study is being conducted by IBM business consultancy
services
42 mn fixed line subscribers in January
According to the telecom regulators, the user base of India’s fixed line
subscribers, including WLL fixed services, crossed 42 million in January 2004. It
was earlier reported that the mobile subscriber base was over 30 million. This
takes the country’s total telecom subscriber base to 72 million. In January, 1.64
million mobile users were added, recording more than twice the growth during
January 2003.
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