News Digest: MyFM, RCOM, Shaadi, IRCTC, TringMe, Nokia, SBI, IRDA, FrontLine, Tejas, Swan, TechM

From http://www.medianama.com/2009/08/223-news-digest-db-groups-myfm-rcom-shaadicom-irctc-tringme-nokia-sbi-irda-frontline-tejas/ on August 25, 2009

By Preethi J

MyFM To Raise 15.2M

Synergy Media Entertainment Ltd, DB Group’s FM radio division, will raise Rs. 1.52 crore through preferential allotment of fully paid up equity shares. It has received approval from the Foreign Investment Promotion Board (FIPB). Synergy runs 94.3 MyFM in 17 cities.

Related: Dainik Bhaskar IPO Filing: Digital Kiosks; IndiaInfo.com; I Media Corp

RCOM Launches Antakshari

Reliance Mobile launched a new VAS – Antakshari -  on its R-World platform which will allow the subscriber to play antakshari with anyone. Charges are Rs.30 per month with 30 minutes free usage. This service is being launched on both GSM and CDMA networks. (TelecomIndia Online)

IRCTC’s Online Sales Boom

Around 34% of the 880,000 tickets sold daily by the Indian Railways are booked online, ticket sale data between April and July 2009 by the IRCTC reveals. This is not all – online booking of the tickets is also popular amongst low income groups. An thumping 63% of online tickets were booked by them. (Business Standard)

Our Take: IRCTC continues to be the poster boy of Indian e-commerce. We only wish it were more efficient – instead of spending hours standing in a queue, we now spend hours on the website – logging back in due to jittery timeouts and searching for train names and numbers.

Related: IRCTC Does $102 Million In Online Transactions In August; Payment Trends; HDFC, ICICI, Cash Cards Significant

TringMe

This Bangalore based 2007 startup has a platform that helps developers create voice-enabled widgets for the Internet. Tringme hosts some 22 million call minutes per month and expects this to soar to 40 million in the next 3-4 months. One of its clients is Indiamart. (Moneycontrol)

Our Take: Such a platform could spark off more apps and options in the VoIP domain – so far ruled by Skype and Fring. Ofcourse there is still the regulatory hurdle to cross before VoIP usage picks up.

Strike At Nokia’s Manufacturing Plant in TN

Nokia employees at its handset manufacturing factory in Sriperumbudur have demanded a wage increase of €21 for all employees. (Evertiq)

M-Banking Adoption
State Bank of India has added 20,000 mobile-banking customers in 2 months, taking the total to 33,000. M-banking is rising in popularity for small value transactions. (PTI)

All Mobile Banking posts

Shaadi.com Stats

The site has 300m page views a month. 6,000 new profiles are added every day. (Guardian)

Insurance Inst Opts For Online Exams

Complaints of malpractices has led the Insurance Institute of India to make entrance exams for insurance agents online. The institute will be aided in setting up the online examinations by NSEiT, a subsidiary of the National Stock Exchange and Insurance Regulatory and Development Authority. (ET)

HomeShop18 To Raise Funding

The retail TV channel and online site is in discussion with prospective financial and strategic partners to raise money in the next year. It has outlined three priorities – be visible in every television household; to invest in customer experience; and, to reward loyal customers. Network18 owns 65% of HomeShop18. (VCCircle)

PE Firm Frontline Strategy Picks Up Stake In Tejas

The amount and stake are not known, and the stake was picked up by Frontline through a secondary transaction. Tejas has been backed by Battery Ventures, Cascade Capital Management, Mayfield Fund, Intel Capital, Goldman Sachs and Sandstone Private Investments. (VCCircle)

Change In Regulations Deferred: DoT

International telcos in India have been dealt a poor hand by the Indian government. The Department of Telecom (DoT) has postponed plans to remove the double taxation they currently have to comply with for offering long distance calls. They pay license fees twice to the government – for bandwidth which they purchase off domestic operators and again when they resell it to enterprises and their customers. (ET)

Etilsalat Awards IT Contract To Tech Mahindra

Following the move by other telcos to outsource their IT operations, Etisalat DB, which runs new telco Swan Telecom (renamed to Etisalat DB Telecom India), may award the majority of its Rs 150 million outsourcing project to Tech Mahindra. (ET)

Other telco-IT company relationships are: Unitech Wireless – Wipro ; Idea Cellular – IBM ; Bharti Airtel – IBM; Aircel – Wipro

Deutsche Telekom Eyes Indian ISP Space; Devas Multimedia Looks To Raise Funds

From http://www.medianama.com/2009/08/223-deutsche-telekom-eyes-indian-isp-space-devas-multimedia-looks-to-raise-funds/ on August 24, 2009

By Preethi J

German telecom conglomerate Deutsche Telekom, which owns T-Mobile in USA, is planning to join the Internet Service Provider arena in India. According to a MarketWatch report, the telco is planning to set up a high-capacity radio network for quick Internet connections in metropolitan areas of India come next year.

I wonder if we need yet another ISP in India, with already a number of incumbent players – Reliance, Tata Indicom, MTNL, BSNL, Hathaway, Tikona, Sify and Bharti Airtel, and France Telecom, Vodafone and DEN Networks also planning ISPs. With the last mile still closed, wireless is being seen as the way to go; which is where Devas Multimedia comes in.

Devas MultiMedia:Looking To Raise Funds

Deutsche Telekom received permission from India’s Foreign Investment Promotion Board (FIPB) last year to invest Rs. 317.85 crore into Devas Multimedia, a little known Bangalore-based wireless services company, which was working on a long term Mobile TV (DMB) project with Indian Space Research Organisation (ISRO). DT has acquired 17% stake in Devas.

Interestingly enough, Devas is looking to raise funds. The company, which already has Telecom Ventures and Columbia Capital as investors, apart from Deutsche Telekom, has a proposal pending with the FIPB for permission to “induct fresh foreign equity participation with the induction of a new foreign collaborator.”

Devas is a curious case: little is known about it, and it still appears to be in stealth mode:  there’s no website and there is little information on it except of it’s work with ISRO and its backers.

India desperately needs a catalyst to boost Internet penetration: Internet growth in July 2009 in India has actually fallen to 2.7% from 3.4% in June and 6.3% in May 2009. Besides the well known issues of delinking last mile access and ISP licensing which are throttling growth, other issues Deutsche Telekom will need to grapple with are low PC adoption and lack of Indic language content.

Companies Eying ISP Space In India

Earlier this year, France Telecom also entered India through Equant Network Services, its joint venture with Emery Technologies with the intention of launching Internet services;  Vodafone too announced its entry. The latest to announce plans of becoming an Internet service provider is DEN Networks, a cable TV company which is planning to go public to raise funds.

The Wireline Alternative: Broadband Over Power

Research and experiments on Broadband over Power Lines have been on for years – news about it pops up every few months. Indian Express has the latest: about Bengal Engineering and Science University professors and CESC have implemented Broadband over Power in two housing estates in Kolkata. The copper wires that supply electricity to double as broadband connections and installing a customer premise equipment that decodes the signals and brings them to your computer. But if it’s that simple, why is it taking so long to materialise? The government recently deferred an application by Powermax Communications, a provider of power transmission  and distribution management systems and broadband over power services, to increase foreign equity participation.

Bharti’s Chairman Grows More Confident of MTN Deal

From http://online.wsj.com/article/SB125084972837849039.html?mod=rss_india_news on August 24, 2009

By COSTAS PARIS

Bharti Airtel Ltd. Chairman and Managing Director Sunil Mittal said the second extension to talks with MTN Group Ltd. of South Africa signals that a deal may be worked out this time around.

“It gives us more confidence, but you never know with these things until the last moment,” Mr. Mittal said in an interview Friday.

Mr. Mittal’s comments came after Bharti and MTN extended their talks until Sept. 30 without giving a reason.

MTN and Bharti, India’s largest mobile-phone operator by subscribers, in May revived talks to create a telecommunications company with annual revenue of at least $20 billion and 200 million subscribers.

People familiar with the situation said Friday that Bharti and MTN have extended their talks to settle differences on pricing and the makeup of the combined entity’s board. The two companies have described their prospective deal as a $23 billion merger.

Mr. Mittal said he wasn’t in a position to confirm or deny whether Bharti would sweeten its offer.

A second person said MTN’s management and some shareholders are asking for an additional $1 billion from Bharti to complete the deal.

The person said there will be more clarity when MTN releases its half-year earnings on Thursday.

The basic terms announced in May would see Bharti accumulate a 49% stake in MTN, buying a stake directly for cash and newly issued global depository receipts, plus receiving MTN shares as part of the swap.

MTN would buy a 25% stake in Bharti for $2.9 billion in cash plus new shares, while stock received by its shareholders would take its stake in Bharti to about 36%.

Bharti, MTN Executives Meet with Indian Finance Minister

http://online.wsj.com/article/SB125110691436753327.html?mod=rss_india_news on August 24, 2009

By MUKESH JAGOTA and R. JAI KRISHNA

NEW DELHI — Bharti Airtel Ltd. Chairman Sunil Mittal and MTN Group Ltd. Chief Executive Phuthuma Nhleko met Monday with India’s federal Finance Minister Pranab Mukherjee as the two companies strive to come closer to a deal to combine.

The meeting comes as Bharti, India’s biggest wireless operator by subscribers, and South Africa’s MTN last week extended their merger talks for the second time to Sept. 30.

The agenda of the meeting with the finance minister wasn’t disclosed, and Messrs. Mittal and Nhleko declined to comment when approached by Dow Jones Newswires after the meeting.

Finance ministry officials also declined to comment on the minister’s talks with Bharti and MTN executives.

Bharti and MTN have been in talks for more than two months on a complex cash and share swap, which they say would be a $23 billion merger.

On Friday, Mr. Mittal told Dow Jones Newswires the second extension to talks with MTN signals that a deal may be worked out this time around. But people familiar with the matter said there are still differences on pricing and the makeup of the combined entity’s board.

Some analysts speculate that the companies’ meeting with the finance minister could be related to foreign ownership laws for telecom firms in India. A foreign company isn’t allowed to own more than 74% in local telecommunications operators.

The basic terms announced in May would see Bharti accumulate a 49% stake in MTN, buying a stake directly for cash and newly issued global depositary receipts, plus receiving MTN shares as part of a swap. MTN would buy a 25% stake in Bharti for $2.9 billion in cash plus new shares, while stock received by its shareholders would take its stake in Bharti to about 36%.

Bharti is 30%-owned by Singapore Telecommunications Ltd.

Mobile Subscriber Growth Slowing Down in India

On Second Republic on 22 May 2009

New subscriber additions by India’s mobile operators appears to be slowing down – the country added around 11.46 million mobile subscribers in April 2009, the lowest in a month in 2009. Compared to additions in the first three months of 2009, this is surely a significant drop. After adding more than 28 million subscribers in January and February, India had added 15.64 wireless subscribers during the month of March 2009. Total subscriber additions in the Jan-March quarter stood at more than 43 million, a world record by all accounts.

Reliance Communications, which offers both GSM and CDMA mobile services, had added around 2.6 million new subscribers during March 2009. Compared to that, it only added around 1.75 million subscribers in April, according to data from AUSPI. In January and February, the operator had added more than 8 million subscribers.

As the April GSM subscriber data shows, almost all GSM operators witnessed a negative growth in monthly subscriber additions. Market leader Bharti Airtel saw only a marginal growth of 0.1% in month on month subscriber additions, according to the data released by industry group Cellular Operators Association of India (COAI). State-owned BSNL, which had added around 2.5 million subscribers in March, saw the biggest drop in monthly growth. Idea Cellular saw a 25.8% drop in its month additions.

With subscriber additions slowing down, it’s going to be challenging for the new operators to take on the current incumbents. However, Aircel’s performance in April is noteworthy and may interest the new operators. Aircel launched its GSM service in several parts of India only recently and had registered a 10.5% growth in its monthly subscriber additions in April.

Bharti crosses 100 million users mark

16 May 2009, 0059 hrs IST, TNN

NEW DELHI: Bharti Airtel’s subscriber base has crossed the 10 crore (100 million) mark, making it the sixth largest telecom service provider in the world. However, considering single country mobile service operator, the company has become the third largest player after China Mobile and China Unicom. Mobile phone customers account for a major portion of Bharti’s subscribers base.

“This is a great achievement for the company. A couple of years back, crossing even the 25 million subscriber base was a dream. At that time few companies like Telefonica, Orange, Deutsche Telecome had that many subscriber base,” said Sunil Bharti Mittal, chairman and group CEO of Bharti Enterprise.

The company reached the first 2.5 crore (25 million) customers mark in July 2006 after around 12 years of operations. As it grew, the growth rate accelerated. The next 2.5 crore customers were added by October 2007 to double the base to 5 crore. For another 2.5 crore subscribers, the company took only 10 months. So, By August 2008, its user base was 7.5 crore. In nine months after that it added another 2.5 crore customers to cross the 10 crore mark. At present, it is adding on an average around 30 lakh customers every month.

“The Indian telecom sector, seen as providing the most affordable services in the world, has grown by leaps and bounds in the last decade. This remarkable journey to 100 million customers is a testament to the vision and commitment of a company that benchmarks itself with the best in the world,” Mittal said.

Despite stiff competition from players like Vodafone, Reliance Communication, BSNL and Idea among others, Bharti Airtel has a market share of almost 33% in mobile segment. At present, around 60% of Airtel’s customer additions come from rural areas. It has already set up 14,000 Airtel Service Centres in rural areas and planning to have 1 lakh such centres across the country by March, 2010.

After achieving this land mark, the next big challenge for Sunil Mittal is to globalise his company. He is satisfied with his position in the country. “We are ahead by 25 million (2.5 crore) customers to our nearest competitor in the domestic market,” he said. However, he is looking for an acquisition opportunity to enter in the emerging market like Africa and Middle East.

Low spectrum fee to come with a rider

15 May 2009, 0643 hrs IST, Joji Thomas Philip & Sandeep Gurumurthi, ET Bureau

NEW DELHI: Leading GSM operators such as Bharti Airtel, Vodafone Essar and Idea Cellular are confronted with a catch-22 situation. The Department of Telecom (DOT) will soon announce a reduction in spectrum usage charges to a uniform 3% of the telcos’ annual revenues. But, only those GSM operators who agree to pay a one-time fee for all excess radio frequencies they hold beyond the 6.2 MHz mark will be eligible for this reduction.

As per the current policy, all telcos share 2-6% of their annual revenues with the government as a fee for using the radio frequencies allotted to them. Spectrum or radio frequencies airwaves is the lifeline for telcos as all communication signals travel on these airwaves.

Further, the catch is, this one-time spectrum fee must be equivalent to the market value of the extra radio frequencies. The committee, set up to resolve all spectrum related controversies, has said that this onetime charge must be established through the upcoming 3G (third generation) airwaves auctions. For instance, if Vodafone Essar has been awarded 2 units of radio frequencies in Delhi & Mumbai beyond the 6.2 MHz mark, it will have to pay a fee equivalent to what the same amount of airwaves fetched during the 3G auctions in these two metro cities to enjoy a lower spectrum usage fee. In such a scenario, Vodafone will share 3% of its revenues from Delhi and Mumbai as against 6% at present. At present, the mobile services offered by all private GSM operators are done via second generation (2G) airwaves. India will soon auction 3G airwaves that will enable its operators to offer high-end services such as ultrafast internet, video conferencing, interactive gaming amongst other services. The panel’s report also adds that this one-time charge should be paid within two months of price discovery (through 3G auctions).

The larger implication is that GSM biggies such as such Bharti Airtel, Vodafone Essar & Idea Cellular, Aircel Cellular and others who hold airwaves beyond the 6.2 MHz mark in several regions across the country will soon have to decide if they want to continue with the present regime and pay a higher levy as against paying this onetime charge and enjoying a lower revenue share rate.

Some of the GSM operators said that they would comment only after unveiling of the new spectrum policy. An industry executive linked to a GSM operator said that ‘if such a clause were to be part of the new policy, telcos would adopt mixed approach’.

“In some circles, where the 3G price discovery may be low, GSM players will opt for this one-time fee, while in other regions, they are likely to continue under the existing regime,” the executive added.

Bharti Airtel reaches 100 million customers mark

15 May 2009, 1609 hrs IST, PTI

NEW DELHI: Bharti Airtel today said its subscriber base has crossed the 100 million mark, making it the world’s third largest ‘in-country’ mobile operator.

The milestone makes every fourth mobile phone user in the country a customer of Bharti Airtel, founded in 1995 as Bharti Tele-Ventures.

“The Indian telecom sector is seen as providing the most affordable services in the world has grown by leaps and bounds in the last decade.

“We are proud to have led the telecom revolution that made a positive impact on the lives of people in every corner of the country as well as the Indian economy,” Bharti Airtel Chairman Sunil Mittal told reporters here.

The company’s equipment partners Ericsson and Nokia- Siemens and nearly 31 per cent equity partner Singtel were present on the occasion to mark the milestone.

“This remarkable journey to 100 million customers is a testament to the vision and commitment of the company that benchmarks itself with the best in the world,” Mittal said.

Besides 25 per cent subscriber share, Bharti Airtel enjoys 30 per cent market share in terms of revenue. It’s only behind two Chinese operators in terms of subscriber size measured within a country. Noting that it has been adding more than 3,000 base stations in a month, Mittal said for the first time, an Indian company has emerged a dominant player in the world and that too was in the telecom sector.

Fewer users sign up for GSM in April

14 May 2009, 0350 hrs IST, ET Bureau

NEW DELHI: GSM telecom operators in India recorded a lower number of subscriber additions of 8.9 million in April as against 10.8 million in March, led by a sharp dip in monthly additions by state-owned telcos BSNL and MTNL. BSNL added just over 1 million users in April as against over 2.5 million in March. The total GSM subscriber base now stands at 297.7 million, Cellular Operators Association of India (COAI) said on Wednesday. The subscriber base data for Reliance Communication was not reported.

Another state-owned telco MTNL, which operates in Mumbai and Delhi, also saw a dip in monthly additions with about 45,553 users in April compared with 92,097 users in the previous month. Both MTNL and BSNL now have a subscriber base of 4.2 million and 47.7 million, respectively.

Airtel led the number of additions made by the GSM operators in April. Inching closer to the 100 million subscriber-base mark, market leader Bharti Airtel added 2.8 million users in April compared with 2.8 million in March, taking its total subscriber base to 96.7 million.

As a result, Bharti Airtel continues to lead the GSM market with a market share of about 32.5% followed by Vodafone Essar with 24.03%. Vodafone Essar, the second-largest private GSM player, reported a total subscriber base of 71.5 million with about 2.7 million users added during April. It added lesser number of users in April compared to March, when it saw close to 2.8 million new users, as per data compiled by COAI.

Aircel, which recently launched its services in Delhi, added over 1.1 million subscribers all India. The operator now has about 19.5 million subscribers in its portfolio. Idea Cellular also added about 1.1 million subscribers during April, taking its total subscriber base to 44.1 million.

(Excerpt from India adds 8.9 mn GSM mobile users in April, 13 May 2009, 1542 hrs IST, REUTERS, reported on ET)

Reliance Communications, which had 72.67 million subscribers at end-March, expanded its GSM mobile services to all the service areas of the country in January, but the majority of its customers are still on rival CDMA technology. Tata Teleservices, in which Japan’s NTT DoCoMo owns a 26 percent stake, also operates on CDMA and monthly additions are reported separately.

Telecom Sector Watch

Excerpt from article published on BS Reporter / Mumbai April 11, 2009, 0:56 IST

Bharti Airtel is expected to outperform Reliance Communications (RCom) due to a stronger revenue and a better growth in profit. A KRC analyst expects Bharti’s revenue to grow by over 50 per cent, while analysts at Edelweiss and MOSL expect it to grow by 28-29 per cent.

The Sunil Mittal-led firm is expected to benefit from lower forex losses due to a sharp depreciation in the yen’s value during the quarter as half of Bharti’s loans are denominated in the Japanese currency.

RCom, despite having witnessed a strong q-o-q subscriber growth of 10-14 per cent, is expected to post a revenue growth of around 14-17 per cent only. Also, the company is expected to see a drop of 4-6 per cent in revenue per minute (RPM) despite a strong growth in traffic. This weakness in RPM along with launch expenses and other associated costs is also likely to push down y-o-y margin by 390 bps. This may result either in a single-digit growth or even a decline in y-o-y net profit.

MOSL expects Bharti’s revenue to grow 28.1 per cent y-o-y and 4 per cent q-o-q due to a 10 per cent increase in q-o-q mobile services. Mobility revenues are expected to grow 3.3 per cent q-o-q, implying an ARPU (average revenue per user) of Rs 305. The margin is expected to decline by 80 bps y-o-y and 20 bps q-o-q to 40.7 per cent. But Edelweiss estimates Bharti’s mobility ARPU to decline by 2.6 per cent q-o-q on lower usage.

MOSL expects RCom’s revenue to grow 13 per cent y-o-y and 2.6 per cent q-o-q due to strong subscriber momentum. The ARPUs are expected to go down by 5-10 per cent on lower quality of incremental subscribers and free promotional minutes in GSM. The margin is expected to decline by 420 bps y-o-y due to an aggressive network expansion. The net profit is expected to fall by 10 per cent y-o-y and 5 per cent q-o-q.Edelweiss estimates mobility ARPU of RCom to decline by 9.5 per cent q-o-q owing to aggressive promotional schemes offered at the launch of its GSM services. Uncertainty in derivative income is a risk and, hence, Edelweiss expects a 9 per cent decline in RCom’s net profit.

DoT appoints independent auditors to examine 4 telcos’ books

Business Daily from THE HINDU group of publications, Wednesday, May 13, 2009

New Delhi, May 12 The Department of Telecommunications has appointed independent auditors to look into the accounts of Bharti Airtel, Idea Cellular, Vodafone Essar and Tata Teleservices to check whether they had paid lower licence fees to the Government. One of the auditors being proposed by the DoT is Contractor Nayak & Kishnadwala.

The move follows recommendations made by the Telecom Regulatory Authority of India asking the DoT to examine Airtel’s revenue reporting in the long-distance telephony segment.

The regulator had noted that there was a shift in Bharti’s revenues to the long-distance segment, which attracts only 6 per cent licence fee as against a maximum of 10 per cent in the case of mobile services.

The auditor has been asked to examine whether the company has for 2007-08 and 2006-07 correctly presented the revenue data in their quarterly and annual statements and whether the company has paid various charges due to the government.

“TRAI has raised a doubt that the company (Bharti Airtel) is shifting the revenue of mobile segment to long-distance segment. To clear the doubt raised by TRAI, it is suggested that we get conducted the special audit of the licencee company,” said an internal DoT note. Similar audit is already under way on Reliance Communications’ accounts.

Large integrated players are increasingly using differential licence fee to pay lower revenue share to the Government. In the current licence fee regime, telecom companies are required to pay only 6 per cent of the annual revenues from long-distance services compared to an average levy of 10 per cent, including spectrum charges, for mobile services.

These companies are saving on the net outgo to the Government by loading higher revenue component to the licence with lower revenue share.

The regulator had suggested that integrated telecom players, which offer a whole range of services, should be asked to submit the break-up of income from their various stand alone subsidiaries to determine the revenue share payable to the Government.

The regulator has proposed that the DoT should carry out special audits of the operator’s account books every 3-5 years.

Users connect better with prepaid

11 Feb, 2009, 1730 hrs IST,TNN

NEW DELHI: Call it the death of post-paid mobile connection in the world’s fastest-growing mobile market. India has all but completely rejected the post-paid option, with nearly 99% of all new mobile user additions in the country accounted for by prepaid connections.

With mobile operators increasingly doling out cut-price offers for newer, often poorer users, customers are also embracing this platform with gusto.

Consider this: Bharti Airtel, India’s largest mobile company by users, added a record 8.1 million-plus customers during the October-December 2008 quarter, of which 99.6% were prepaid users. Ditto for Reliance Communications, Vodafone Essar and Tata Teleservices. About 99.9% of RCOM’s 5.5 additions during the quarter went in for a prepaid connection while for Vodafone Essar and Tata Teleservices, the numbers were 97.3% and 96%, respectively. “Fundamentally, the Indian consumer prefers prepaid as it empowers them. The customer wants to control how and when to spend and sees real value on a call-by-call basis in prepaid,” said Bharti Airtel chief marketing officer Sanjay Gupta.

The switch towards prepaid from postpaid or contract connections has been steadily climbing. From accounting for about 60% of the country’s total subscriber base in 2005, prepaid users now constitute over 92% of India’s 360 million mobile customer base. Bharti’s numbers for October-December 2007 quarter show that a little over 95% of additions then preferred prepaid connections.

Telcos renew Rs 500-cr BPO deals

12 May, 2009, 1616 hrs IST,TNN

NEW DELHI: Telecom operators, such as Tata Teleservices, Vodafone and Idea Cellular, are expected to issue multi-year BPO contracts totaling nearly Rs 500 crore in the next couple of months. The telcos are also likely to consolidate the BPO work among fewer vendors, which means the winners will get a larger pie of the contract.

With the telcos’ existing BPO contracts coming up for renewal, they have decided to invite new bids from BPO firms. While Tata Teleservices and Idea have already floated requests for proposal (RFPs), Vodafone is yet to do so, said an industry executive in the know of the developments.

It’s learnt that the outsourcing contracts will be for a mix of inbound and outbound services, including customer retention, cross-selling and payment follow-up. All contracts are expected to require about 500- 1,000 seats each. While the Tata Tele contract is estimated to be worth about Rs 150 crore spanning three years, Vodafone is expected to sign BPO deals worth about Rs 150-180 crore. Idea’s contract is expected to add another Rs 150-160 crore.

“The existing telcos are either expanding into new circles (Idea) or launching new services (GSM launch by Tata Tele) and their customer support requirements are growing. They are also looking at fewer vendors to ensure greater quality control,” said a BPO industry executive participating in these bids.

Both Tata Teleservices and Vodafone declined to comment in response to an e-mail questionnaire on the BPO contracts. Idea said it’s looking at new BPO contracts in a couple of months as part of its ongoing expansion process.

The new BPO deals will mean a new opportunity for BPO firms such as Aegis BPO, Serco BPO (formerly InfoVision), MphasiS BPO and Spanco BPO. Most of these firms already cater to multiple telecom operators. For instance, Aegis BPO provides customer support services to four leading telcos, Bharti Airtel, Vodafone, Idea and Tata Teleservices.

“Telecom companies offer a significant opportunity as this is a sector that continues to grow and add record subscribers every month,” said Serco BPO chief exec Aditya Gupta.

Telecom companies such as Bharti Airtel have been the pioneers of outsourcing in the domestic market. Indian telcos have outsourced IT systems, network management and customer care services to players such as IBM, Nokia Siemens Networks and Aegis BPO. According to research by ValueNotes, outsourcing of services in the telecom sector is expected to grow to Rs 2,770 crore by FY12 from Rs 720 crore in FY08.

The best is over (On how the future might be for Airtel)

Shobhana Subramanian / Mumbai May 11, 2009, 0:46 IST on Business Standard

It’s one of the best moves Bharti Airtel ever made. When peer Reliance Communications (RCom) rolled out its GSM network in January this year, it was dishing out free minutes to anyone who bought a connection. One might have expected Bharti to retaliate. But it refused to join the price war and didn’t even tweak its tariffs, let alone offer free minutes.

In fact, Bharti hasn’t touched its key rates for quite a while now, almost 18 months. That’s despite the fact that both Vodafone and Idea Cellular have been rolling out networks in new circles. Subscribers seem to be willing to pay up—the telco commands a revenue market share of an enviable 32 per cent. And the high base doesn’t seem to be coming in the way of growth.
In 2008-09, the Rs 36,962 crore firm added nearly 32 million subscribers, close to a fifth of the net additions during that period, so that its subscriber base is now nudging 94 million.

MOUs trend down

Indeed not tinkering with call tariffs seems to be paying off: in the March 2009 quarter, Bharti’s average revenue per user (arpu) fell by a less than expected 6 per cent sequentially.

Also, while the minutes of usage (mou) per subscriber dropped by 20 minutes (or 4 per cent) sequentially to Rs 485, eleven minutes were lost because of the fewer number of days in the quarter. Of the rest, some minutes were yielded to the competition and some lost because more connections are being sold in rural markets.

However, it’s evident that elasticity trends aren’t showing an uptick—people don’t seem to be talking more just because it costs less to do so. In fact, the drop in mou for RCom during the quarter was a sharper 9 per cent.

Also, since Bharti will continue to expand in the rural areas—currently over 50 per cent of new subscribers are from the hinterland— the growth in traffic can’t but slow down. It’s happening already: Bharti’s total wireless minutes grew by just 5.7 per cent sequentially in the March 2009 quarter lagging the 9.7 per cent growth in subscribers—the trend was similar in the December 2008 quarter.

Calling rural India

The rural spread could hurt arpus too. But that’s the only way forward for the telco, which now reaches 81 per cent of the population compared with 71 per cent at the end of 2007-08.
Given that roughly 70 per cent of India’s population is rural and urban-teledensity has already hit a high 75 per cent—90 per cent plus in the metros—it’s rural subscribers who will come into the fold and drive the industry for the next few years. Industry watchers say there’s an opportunity here for Bharti which it is well-positioned to exploit; that’s because it has 900MHz of spectrum in 13 service areas.

But a rural franchise can also mean lower arpus. So far though, the revenue per minute (rpm) has held up pretty well, coming off by just 2 per cent sequentially in the March 2009 quarter, a factor that helped the support margins for the wireless business at 31.5 per cent. As analysts point out, the ebitda (earnings before interest depreciation and tax) per minute at 20 paise has stayed more or less flat now for four quarters.

However, although the management has indicated that most of the capital expenditure is behind it and that some channel costs are lower in rural areas, that may not be enough to cushion a fall in the margins which could result from lower growth in revenues.

Top line to taper off

Indeed, the days of an annual 35-40 per cent growth in revenues are over. The sequential revenue growth in the March 2009 quarter was a rather disappointing 2 per cent betraying the severity of the competition.

Typically, revenues have grown at around 5-6 per cent and on occasions, even faster. So it’s not surprising that even for the current year, analysts are pencilling in a sales growth of just 16-17 per cent: compare that with the 37 per cent rise in revenues in 2008-09 to Rs 36,962 crore.
The growth for 2010-11 is a far more subdued sub-15 per cent. Even if the RCom threat has subsided after it withdrew the free minutes scheme, the competition from both incumbents and new entrants—who are also expanding their network—will continue to hurt.

Vodafone, for instance, is already netting 2 million subscribers a month and by the end of the year will have a pan-India footprint. The multinational has been gaining market share in many of the new circles where it has launched.

Idea Cellular too has become a stronger player after the acquisition of Spice and although it operates only in 16 circles now will have a pan-India presence by end 2009.

In January this year, despite RCom’s GSM launch, Idea trebled its share in the Mumbai market, albeit on a low base. Also, while churn for Bharti, both in the pre-paid and post-paid segments, had fallen to an all-time low in the December 2008 quarter, it went up again in the March 2009 quarter.

THE TONE GETS LOUDER

Source: CLSA Asia-Pacific Markets, E-Estimate
The arrival of Mobile Number Portability (MNP) too could result in some churn though it’s unlikely Bharti will lose too many customers given its strong brand equity, reach and value-added services.

The 3G kicker

Where Bharti scores over its rivals is in the scale that it has built—the telco is in a far better position than its rivals to absorb costs. Moreover, its strong balance sheet will allow it to bid for and offer 3G services without taking on too much debt. That’s why the sooner 3G spectrum auctions are held, the better for Bharti.

Analysts point out that since the lack of 2G spectrum remains an issue, 3G will probably be used mainly for voice services initially, but add that Bharti can always offer value-added services at higher charges which could offset some of the fall in the 2G arpus.

The company has said it would spend $2-2.2 billion on capex this year and finance this from internal accruals since it now generates free cash flows on a stand-alone basis; also it needs to make much smaller investments from here on since it already has a huge reach.

Peer RCom, on the other hand, has decided on a smaller outlay of Rs 10,000 crore for expanding its network in the current year, possibly because it is far more leveraged. That’s surprising given that RCom needs to expand its GSM network. Bharti’s other initiatives such as mobile commerce and mobile banking revenues will start paying off though how soon they will contribute meaningfully to the bottom line is hard to tell.

The top line for non-mobile segments, in the March 2009 quarter, was nothing to call home about—the wholesale carrier business, in fact, saw a sequential fall in revenues.

Industry watchers believe that with Idea Cellular and Vodafone putting up their own fibre networks, Bharti’s revenues in the carrier segment will be driven largely by captive usage, which in turn will be a function of how well the the wireless business does. Bharti holds a 42 per cent stake in Indus Towers and while the investment is currently a drag on profits, analysts believe the venture should make money this year.

The best bet in telecom

Of course, earnings growth for Bharti will taper off in the next couple of years –analysts are estimating a compounded 16 per cent growth in net profits between 2009-2011. In 2008-09, net profits grew 26 per cent to Rs 8,470 crore.

Concerns on over-ownership by foreign investors, RCom’s GSM rollout, company executives selling shares and the cut in termination fees have left the stock subdued in recent months. The stock is currently valued at just around 7.8 times 2009-10 EV/ebitda (enterprise value to ebitda).

Surprisingly, RCom trades at just a 14 per cent discount to Bharti–an EV/ebitda of 6.7 times, which is much too small given that Bharti has a much stronger balance sheet with a net debt to equity ratio of just 0.23 times whereas RCom’s net debt to estimated ebitda for 2009-10 is expected to be just under three times.What’s even harder to understand is why Idea Cellular trades at an even smaller discount. Although Idea has a strong balance sheet with close to Rs 5,000 crore of cash, it has neither the reach nor the scale that Bharti has and makes losses in several circles. So it’s Bharti for those who want to play telecom in India