Bharti, MTN to see $6.9 bn additional debt after deal: Fitch

3 Jun 2009, 1628 hrs IST, PTI on http://www.economictimes.com

NEW DELHI: A potential merger

being discussed by Indian telecom major Bharti Airtel and South Africa’s MTN could increase the net debt of the two firms by about $6.9 bn, global rating agency Fitch said today.

“Under the current terms as presented to the market, it could result in additional net debt of 4 bn dollars at Bharti and 2.9 bn dollars at MTN,” Fitch said in its comments on the potential transaction, but noted that it would wait for finalisation of the transaction before taking any rating action on the two firms.

Fitch said that it would closely monitor developments and was taking “note of the strategic merits of a potential partnership between Bharti and MTN, as well as the positive impact on their respective business risk profiles in terms of diversification and enhanced scale.”

“Nevertheless given the early stages of the discussions, potential regulatory hurdles and other associated uncertainties surrounding the transaction, Fitch will await finalisation of the transaction structure before taking any formal rating action,” it added.

Opera leads mobile-browser market

On http://www.ciol.com

HELSINKI, FINLAND: Norway’s Opera Software overtook Apple’s iPhone browser in May as the most popular mobile browser in the world, Web analytics firm StatCounter said on Tuesday.

Of all Internet pages that were downloaded to mobile devices globally in May, 24.6 percent were downloaded through Opera’s browser and 22.3 percent via iPhone, StatCounter said.

The top spot has see-sawed this year.

“Opera began the year in the number one slot but iPhone overtook it in February,” Aodhan Cullen, chief executive of StatCounter, said in a statement. “It will be fascinating to watch how this battle plays out over the year.”

Opera sells its browser to many cellphone makers and operators, and consumers can directly download it for free, while the Apple browser’s ranking reflects only iPhone users surfing the Internet.

Nokia, the world’s top cellphone maker, retained third place in mobile browsers with 17.9 percent of the market, StatCounter said.

StatCounter said its research data is based on four billion pages loaded per month.

Interview — CDMA is better than GSM: Sistema Shyam

From http://www.ciol.com on 01 June 2009

BANGALORE, INDIA: Indian telecom sphere is all set to witness a tug of war with six new international telecom players set to enter the scenario.

Sistema Shyam Teleservices, a joint venture between Russia’s Sistema and India’s Shyam group, the only CDMA (code division multiple access) player of the lot, recently launched its services in West Bengal.

During an interview given to CIOL, Vsevolod Rozanov, president and CEO, Sistema Shyam TeleServices, said that CDMA is a better technology than GSM because it enables better utilisation of the frequencies available, and thus helps in bringing down the costs. Excerpts:

CIOL: The Indian metros and urban areas have attained saturation in terms of telecom density. So where do you see the demand coming from and for what?

Vsevolod Rozanov: If we have to grow fast, apart from expanding our footprint in new circles and getting new customers (first-time users), we have to wean away customers from the incumbents.

We believe there is a huge market for us to grow. While there are players who have the first mover’s advantage, there is still a vast chunk of existing individual users who will find higher value for money in our tariff and billing plans.

CIOL: What are your investment plans for India? What will be the focus?

VR: We plan to invest $5.5 billion in India over a period of five years. We will utilize most of this projected investment over the next two years for setting up infrastructure that will enable accessibility and better connectivity for mobile phone users.

We have already invested more than $1 billion in setting up our network. We have launched the brand in Rajasthan, Tamil Nadu, Chennai, Kerala and Kolkata. We are planning to launch services in Delhi by Q3 this year, and looking to foray into one circle every month.

We will eventually cover UP, Haryana and Maharashtra circles by the end of this calendar year. Thus, in the next nine months, the MTS brand will be seen in half of the 22 telecom circles across the country, achieving a pan-India footprint by mid-2010.

CIOL: Do you see a possibility of M&A going forward to meet the increased challenge? What is your take on infrastructure sharing among service providers to combat frequent network disruptions owing to issues like natural disasters?

VR: We are not aware of any significant player in the CDMA segment in India who is planning to hive off its telecom business.

We will have a combination of self-owned and shared infrastructure to ensure that we provide the best connectivity across the country. We already have tie-ups and agreements with various infrastructure companies across the country to ensure superior quality of service.

CIOL: How different will be your ‘go-to-market’ strategy?

VR: In Rajasthan, the key message of our campaign is to create a churn in the market through the slogan, “Badlo life ka plan” (change your life’s plan).

Today over 50 per cent of our subscribers in Rajasthan are not new customers, but those who have switched over from other mobile service operators. They are doing so because they are frustrated with the quality of the old incumbent networks, and are willing to try our non-congested network.

We do not see much difference between GSM (global system for mobile communications) and CDMA. Customers using CDMA technology are approximately one quarter of all. Given the size of the Indian market, this is not small at all.

We have been looking at whether we should wait until we are fully ready with CDMA data offerings or we should start building our customer base and deliver our data offers a bit later. We decided to go in for the second option. We will be coming out with the data offering soon.

CIOL: With several service providers in the frame, will the cost of service be brought down further?

VR: India is a highly price sensitive market. Our pan-Indian strategy will focus on simplicity in all our marketing strategy. We will offer simple, very clear and understandable tariff plans for our customers. Our tariffs will be the lowest, with no hidden charges.

We have dropped the price of entry-level colour phones to Rs 999, and they come with six months of free calls and lifetime validity. The subsidy that we incur on every phone is going down as the price of phones is going down faster than the fall in new offers.

We will offer SMS at 50 paise unlike most other operators who charge one rupee. The tariffs can fall further, if the regulator makes the termination charge cost-based, which would be less than 10 paise a minute from the current 30 paise, the same can be passed on to customers.

CIOL: How do you see advanced mobile technologies – such as 3G, CDMA – gaining currency in rural areas as well, especially when India has very less wireless penetration?

VR: The advanced mobile technologies such as 3G have the potential to meet the digital divide between rural and urban India by penetrating into far-fetched areas, where fixed-line connectivity is sparse due to high deployment cost of infrastructure. 3G will not only alleviate the existing level of voice-based services, but also make Internet broadband access a reality for larger population.

3G will also fit well into the urban user’s plan. It will enable quality voice and address the pent-up demand for high-bandwidth data exchange on mobile phones and support high-speed Internet access on other portable devices.

The government has recognized 3G as the cornerstone for growth of the telecom sector and is expected to allocate the third generation on priority.

CIOL: What is being done to take the brand into the market?

VR: MTS is the eighth-largest telecom company in the world with over 100 million customers. In India, we are the sixth or seventh operator. We are using faces of models talking on the mobile phone to relate to the consumers and give our service the human touch. We have also decided to concentrate most of our advertising and marketing spend on local media, via regional language instead of English.

We have also recently rebranded our existing operations in Rajasthan, under the ‘Rainbow’ brand, to MTS. Rainbow was a regional brand limited to Rajasthan and what we needed was a pan-India brand name. Accordingly we painted the Pink City Jaipur to red – the colour of our brand.

The most important factor is the time-to-market – how quickly we could launch the brand across India in the next nine months. With MTS, the brand material, logo and specifications are all readymade and already available

CIOL: How do you look at the slowdown?

VR: Global economic slowdown is a business challenge for enterprises across the globe. However, Sistema is one of the largest public diversified corporations in Russia. We have sufficient funds to expand our operations, and launch our services on a pan-India basis.

India is one of the fastest growing markets for telecom, and has been relatively un-impacted by recession. As of now, the situation is under control, because the financial meltdown has not impacted Indian banks in a major way.

However, if the situation worsens, then we could be in a spot as we are not allowed to bring in foreign funds in the form of debt. We are allowed to bring money in the form of equity, but our promoters would like to have the flexibility to decide on what form they would like to pump in money into the company.

The Indian Government should consider relaxing the foreign investment norms, which will allow international players to bring in funds in the form of loan.

CIOL: What would be the newer trends in the Indian mobility sector?

VR: The year 2009 is expected to be an exciting year for the Indian mobile telephony market. With the Congress-led UPA (United Progressive Alliance) voted back to power, the sector can look forward to speedy auction of the long-awaited 3G spectrum.

A significant portion of the rural population will witness phased growth in first-time Internet access and welfare programs covering telemedicine, e-governance and distance learning – propelled by 3G mobile broadband and WiMax.

While the 3G network would infuse better services for subscribers and enhance revenues from VAS (value-added services) for operators, the introduction of MNP will offer users the convenience of retaining their mobile phone number even after switching between networks and operators.

Mobile payment and commerce for micro-transactions is also expected to attract greater user-orientation.

Interview — Bharti Airtel hopeful of 200-m user mark in 3 years

On The Hindu Business Line dated 03 June 2009

Thomas K. Thomas

New Delhi, June 2 To keep its leadership position in the fastest growing mobile market, Bharti Airtel is embarking on a multi-pronged strategy, including a comprehensive customer retention programme, partnerships with companies that offer mobile entertainment and commerce services, domestic acquisitions and a thrust on driving growth in the rural areas.

In his first interview after taking over as the President of Bharti’s mobile business, Mr Atul Bindal, told Business Line, “I do not agree with those who say Indian mobile growth story is on the verge of getting over. We will reach the next hundred million subscribers by a combination of reaching out to the huge potential that exists in the rural areas, taking advantage of the untapped opportunity in large urban areas and possibly through the organic route which we will evaluate as when opportunities come by.”

Bharti crossed the 100-million mark in May and is hoping to reach the 200-million mark in another two-three years.

Number portability

Asked on the impact on Bharti of new players and introduction of mobile number portability (MNP), Mr Bindal said the company has put in place a customer life-cycle management system which will enable it to take customer services to the next level.

“At present most operators are looking at a few broad consumer segments to create offering and services around them. We are going to take this to the next level wherein Bharti will target micro segments of subscribers to offer customised services. For example, a subscriber who travels a lot to a particular country would like to get a special international roaming tariff. The system will allow us to target products based on the user’s behaviour rather than launch broad mass offerings,” Mr Bindal said.

He added that MNP is an opportunity for Bharti to acquire customers from other operators.

Mr Bindal reckons that mobile commerce and mobile entertainment are going to be big applications.

“Value added service the way we know today is going to change drastically. We are giving a huge thrust to music, games, movies and sports under mobile entertainment wherein we plan to be an end-to-end service provider. We will also enable application providers to use Bharti’s network as a conduit to reach our subscribers. In m-commerce, we are looking at the unbanked segment and micro-finance in a big way,” he said.

Asked if Bharti was open to tie-ups with companies such as Nokia, which also is launching an entertainment platform, Mr Bindal said that such partnerships were possible.

Acquisition plan

He also did not rule out the possibility of Bharti acquiring small companies offering value-added services or a technology that will add to its business model.

“Bharti has always been in favour of strategic partnerships and alliances as long as it offers a compelling value proposition to our customers,” Mr Bindal said.

BSNL set to invite fresh tenders to run WiMax ops

3 Jun 2009, 0223 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: India’s largest telecom firm BSNL will invite fresh tenders to run its WiMax operations, after the previous attempt was aborted in light of dubious operators making it to the final shortlist. The state-run firm will now seek fresh bids for franchisees across the country to roll out technology that allows users wireless access to high-speed internet and other data applications

 over a large area, according to two top executives of the company. BSNL expects WiMax to generate multi-billion dollar revenues over the next 10 years.

ET had reported on February 20 that a string of ‘shell’ companies that exist only on paper had made it to BSNL shortlist for WiMax.

The telco subsequently cancelled the tender after its own investigations revealed that five of the six shortlisted companies — WiExpert Communications, SV Telecom Systems, Digitelco Communications,

Spectrus Communications and Technotial Infoways — were acting as ‘fronts’ for certain individuals.

It was found that these companies shared the same corporate details, notaries, auditors and dates of incorporation, and even their last annual general body meeting was shown to be held on the same day.

BSNL came under pressure from its labour unions to scrap the tender following reports of wide-scale corruption in the methodologies adopted to shortlist successful bidders. Doubts were also raised on the disqualification of several companies with proven track record of offering WiMax services including Soma Networks, Cisco-backed Terracom, Unwire India and Welcomm Communications — it had a tie-up Huawei and Aricent — in the earlier shortlist.

This has strengthened the allegations of a possible scandal especially since BSNL had failed to provide valid reasons for the disqualification. During the recent election campaign, opposition BJP had alleged that five of the six shortlisted companies were promoted by telecom minister A Raja’s confidant Sanjay Kapoor and had sought a CBI probe into the issue.

“BJP demands that allotment of BSNL’s WiMax franchise should be suspended immediately and the telecom minister be sacked as reports suggest wholesale loot and corruption in the process,” party spokesperson Prakash Javadekar had said during a press conference in Delhi on May 6.

Earlier this year, the WiMAX Forum, an industry association that has more than 530 member companies globally and 50 members in India had warned BSNL that companies existing only on paper are exploiting lax eligibility criteria for bids invited by the telco for franchisee operators for its WiMax services.

The Forum had also alleged that these newly floated front companies have approached global majors to buy them out quoting BSNL’s spectrum and network assets as valuation criteria. “This is a result of the lax eligibility conditions in the tender which these paper companies are exploiting,” the association had said.

No criminal cases against telcos: DoT; Foreign telcos get clean chit in licence fee, service tax case

3 Jun 2009, 0143 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: Department of telecom (DoT) will not file any criminal case against Indian and international long-distance operators including AT&T, British Telecom, France Telecom, Verizon, Bharti Airtel, Reliance Communications

and Tata Communications after investigations by both the CBI and an internal committee of the communications ministry proved that collaborations between these players did not result in revenue losses to the exchequer.

The DoT had earlier alleged that the international operators were providing long distance services to customers in India by tying up with Indian counterparts rather than taking separate licences leading to huge losses in levies to the exchequer.

The DoT had said that these foreign operators had not paid a one-time entry fee of Rs 25 crore (prior to January 1, 2006) plus 15% of their annual revenues as levies for offering long distance services in India. All these international long distance operators have now taken licences for their Indian operations.

After the CBI had completed preliminary investigation on behalf of DoT, the central agency had suggested that the government file a case against these companies for a thorough probe into probable financial loss.

But, following the CBI report, the DoT committee gave an opportunity to all these companies to explain their viewpoints on the alleged violations. On studying the presentation by these telcos, DoT committee concluded that there was no loss to the exchequer.

Story on The Hindu Business Line dated 03 June 2009

Foreign telcos get clean chit in licence fee, service tax case

Thomas K Thomasin

New Delhi, June 2 In a move that removes all hurdles to global telecom firms to bid for third generation mobile (3G) spectrum, an internal panel of the Department of Telecom has decided to close a six-year-old case against international majors including AT&T, BT (formerly British Telecom), Equant and MCI Worldcom for alleged evasion of licence fee and service tax.

While it is not clear on who will actually bid for 3G spectrum, a clean chit from the DoT panel on the issue has removed possibilities of any legal complications later on for these multinational majors.

The issue dates back to 2003 when it was alleged that the foreign telecom players including AT&T Communications Services India, Equant and MCI Worldcom India were selling managed data network services to corporates in India without taking any licence from DoT.

It was alleged that these companies had got into a partnership with Indian operators, including Videsh Sanchar Nigam Ltd (now Tata Communications), Reliance Communications and Bharti, to bypass paying local taxes and levies. The companies were hauled up by the Parliamentary Standing Committee on IT for allegedly violating foreign direct investment norms and also for depriving the national exchequer.

The matter was referred to the Central Bureau of Investigation which, in turn, put the ball back in DoT’s court on the ground that the telecom department should carry out its own assessment based on the licence conditions. The CBI had concluded that in case the DoT found irregularities then it could lodge an FIR for further investigation.

But now, in a relief to the multinational operators, a DoT committee has concluded that the alliance with Indian players was not illegal. For example, in the case of AT&T, the DoT panel stated, “there is no loss of revenue to the Government as the service tax have been properly accounted for and the licence fee has been paid by VSNL. Further, as per terms and conditions of the international long-distance licence, the licensee can always employ or appoint agents for provision of service.” The panel said that AT&T has produced invoices and tax details to prove that it had met with local laws in India.

“The committee feels that in the case of AT&T, being the service support organisation of VSNL and interfacing with customers in India on behalf of VSNL, there is no violation of Indian Telegraph Act 1885 and loss to exchequer. On the part of VSNL also there is no violation. Therefore, there is no merit in the complaint and the case can be closed,” it added.

In the case of BT, the DoT panel observed that the company had got into an arrangement with Bharti to service its global customers in India. BT, however, had also serviced clients directly through its subsidiary in Singapore.

The UK-based company claimed that the revenues earned by the Singapore unit relate to services provided by BT outside India and, therefore, it was not liable to pay service tax and licence fee to the DoT.

Similar story on http://www.ciol.com at http://www.ciol.com/technology/mobility/news-reports/dot-clears-3g-spectrum-hurdles/3609120497/0/

MTS Hits 1 Million Subscriber Mark

On http://www.efytimes.com on 02 June, 2009

Tuesday, June 02, 2009: Sistema Shyam TeleServices Ltd (SSTL) has reached the subscriber base of one million for its service brand MTS. In the last three months, the company expanded its presence from Rajasthan to three more circles including Tamil Nadu, Kerala and Kolkata covering 13 per cent of the population in the country.

Commenting on the performance, Vsevolod Rozanov, president and CEO, SSTL, said, “The first magical number of a million gives us the confidence that the MTS brand is gaining popularity and our customers acknowledge and believe in the brand promise of superior network quality, exceptional customer service and honest and simple tariff plans. As a new telecom operator, our performance in the last six months has surpassed our expectations. I am confident that we will continue to progressively expand our presence with attractive pricing and superior customer care delivery.”

MTS as a pure play CDMA operator has achieved a share of net addition of subscribers in the range of 11-13 per cent per month, of the total mobility market of Rajasthan, since launch on the 1 October 2008. As of today, Rajasthan contributes 87 per cent to the subscriber-base of MTS, while the remaining 12.5 per cent is spread across Tamil Nadu and Kerala where services were launched two months ago. Kolkata is the latest circle to introduce the brand MTS.

MTS provides telephony connections to over 600 towns of Rajasthan, 513 towns of Tamil Nadu and 247 towns of Kerala, in addition to Kolkata where it made a foray in May this year.

Similar story in

• The Hindu Business Line at http://www.thehindubusinessline.com/2009/06/02/stories/2009060251510400.htm
• http://www.ciol.com at http://www.ciol.com/technology/mobility/news-reports/mts-touches-one-million-subscriber-mark/2609120382/0/

SingTel to keep stake in Bharti Airtel intact

Gairola, Hindustan Times , 03 June 2009

The proposed partnership deal between Bharti Airtel and South Africa’s MTN may not necessarily result in huge dilution of Singapore Telecommunications Ltd (Singtel), which holds a 30 per cent stake in Bharti.

A source familiar with the deal said that Singtel finds India an important market and is exploring ways such that it does not have to dilute its equity in the company, if the Bharti-MTN deal goes through.

Singapore’s largest company by market capitalisation, Singtel neither confirmed nor denied the development.“Discussions between Bharti and MTN are ongoing at this stage and as stated in Bharti’s press release, SingTel will remain a significant shareholder and strategic partner in Bharti post any successful transaction,” said a Singtel spokesperson in written reply to Hindustan Times.

“Consistent with our approach as a strategic investor and equity accounting for our investments, we will continue to equity account for Bharti, in its enlarged form post the transaction if this is successful,” the spokesperson said.

On May 25, Bharti Airtel announced a “strategic partnership deal” with a broader objective to achieve a “full merger” with MTN. The announcement said that MTN and its shareholders would acquire about 36 per cent economic interest in Bharti, of which 25 per cent would be held by MTN and the rest will be held by MTN shareholders.

In turn, Bharti would acquire about 49 per cent shareholding in MTN.

By virtue of its 30 per cent holding in Bhrati Airtel, Singtel’s stake in the post-merger scenario should fall to about 19 per cent. “However, Singtel is looking at higher stake in India operations,” said the source. “The company would like to maintain the present level of equity.”

Goldman Sachs is advising Singtel on this deal, the source said, adding that Singtel is willing to extend financial support to Bharti for the deal. The size of the two-way deal is about $23 billion.