Telcos’ wait for airwaves gets longer

17 Jun 2009, 0702 hrs IST, Joji Thomas Philip & Sandeep Gurumurthi, ET Now

The wait for additional airwaves, key for mobile operators to expand their customer base, has just got longer, with the telecom ministry deciding to make any decision on this only after the upcoming auction of third-generation spectrum, according to a top official in the department of telecom (DoT).

Communications minister A Raja and Finance Minister Pranab Mukherjee met twice on Tuesday, but were unable to reach a consensus on key issues related to 3G auctions such as the base price for these radio frequencies as well as the number of players to be allowed to offer these high-end services.

“No consensus as of now on the base price. We discussed various suggestions — whether we should go for uniform base price or opt for differential pricing, according to circle, depending upon commercial viability of that area,” Mr Raja told reporters after his second meeting with Mr Mukherjee.

As a fallout, the telecom ministry has decided that it will take a call on all issues related with second-generation spectrum, the airwaves on which all mobile services are offered at present, including the methodology for future allocations, the pricing for this scarce resource and the usage charges for utilising these airwaves only after the upcoming auctions of third generation spectrum, the official said on condition of anonymity.

The ministries are divided over the base price for the 3G auctions with DoT proposing a reserve price of Rs 2,020 crore for pan-India 3G spectrum and the finance ministry wanting it to be doubled. DoT has said it is open to hiking the reserve price to Rs 3,540 crore as a compromise.

The two ministers said for the first time that they were willing to look at a differential pricing formula to arrive at a base price for 3G auctions, vital for high-end services such as video conferencing and high-speed internet on the mobiles.

Industry analysts, however, say using a new formula to arrive at differential pricing for each circle will be a time-consuming process that will further delay the 3G auctions.

The development implies that existing telcos will not get 2G spectrum till the issue is settled. Now, they will have to invest heavily on infrastructure to ensure that the quality of services do not deteriorate.

At present, all telecom services are offered on 2G spectrum and these airwaves have been given to telcos based on their subscriber numbers. Put simply, additional radio frequencies are dished out as telcos as they add more subscribers. Currently, India follows a controversial practice of allocating spectrum based on companies’ subscriber base, and is the only country in the world that follows this method.

There are two key factors that have led to the communications ministry deciding to stop all 2G allocations until the completion of 3G auctions.

First, the spectrum panel in its report submitted last month had said the country should adopt the internationally-accepted auction system for issuing additional 2G airwaves to telcos. This committee, consisting of academicians, industry representatives, government officers and industry representatives, had suggested that the 2G pricing be market-linked and be related to the auction price of 3G spectrum.

Second, the committee had also suggested that all telcos who hold radio frequencies beyond the 6.2 MHz mark be charged a one-time fee for all the extra radio frequencies they hold, while adding that this one-time fee be calculated based on the 3G auction price.

The communications ministry can act on these recommendations only after the 3G auctions take place.

The larger implication is that all telcos will have to shell out huge amounts, both for the excess 2G radio frequencies they hold as well as for all additional allocations in the future.

Additionally, DoT’s move to freeze all 2G allocations is also set to impact all telcos. For instance, India’s largest telco, Bharti Airtel, is awaiting additional spectrum allotment of 1 MHz each in five circles.

Reliance Communications, which has start-up spectrum in all 22 circles in the country, is now eligible for the next tranche in six circles as it has reached the prescribed subscriber numbers in these areas. Other telcos such as Vodafone Essar and Idea Cellular too are awaiting additional spectrum in several circles.

With no airwaves allotments over the next couple of months, these operators will have to spend significant amounts in setting up new cellsites. Analysts say for most operators, it is, therefore, a tradeoff between increased capex and allowing the quality of services to deteriorate on account of the spectrum crunch.

This is because it is technically possible to have increased number of subscribers using the same amount of radio frequencies, provided operators spend significant amounts in building more base stations and subscribing to the latest technological innovations.

It is not just the large players that are impacted by the latest policy logjam. The government’s move to put all allocations on hold will also pinch small players and new entrants like Datacom, Unitech Wireless

and Swan Telecom, who are awaiting start-up spectrum in many regions.

Datacom row ends as Nahata agrees to sell stake to Dhoots

15 Jun 2009, 0040 hrs IST, Chaitali Chakravarty & Joji Thomas Philip, ET Bureau

NEW DELHI: Mahendra Nahata of Himachal Futuristic Communications (HFCL) has finally agreed to sell his 36% stake in telecom service provider Datacom Solutions to the Dhoots of the Videocon Group to end a year-long corporate battle that had spilt over to lenders, regulators and even potential foreign investors, two people familiar with the negotiations said.

The Dhoot family, which owns a 64% in Datacom, is already negotiating with a European company to pick up a strategic stake in the company to bankroll its pan-India rollout plans, a person familiar with the settlement said on condition of anonymity.

While Mr Nahata’s 36% stake is valued at around $300 million (about Rs 1,422 crore), the HFCL chairman will not get this payment immediately, top executives said. As of now, the Dhoots had paid Mr Nahata a ‘token payment’ and the remaining would be paid in tranches, they added.

Datacom, which had got licences to offer telecom services in all circles in India except Punjab early last year, has yet to start operations mostly due to the standoff between its two partners.

Both Mr Nahata and Mr Dhoot denied that any such deal has taken place.

Mr Nahata said that talks of any settlement between the two partners of Datacom were baseless, adding that he would continue to remain a stakeholder in the telco. Similarly, Videocon group chairman VN Dhoot, in reply to an email query, said: “There is no question of shareholding changes or settlements or payouts between the two parties.”

A person familiar with the deal said that it is likely to involve a merger of HFCL Infotel’s telecom operations in Punjab with Datacom.

But Mr Nahata will not get any additional cash consideration for HFCL Infotel, as its debt of more than Rs 400 crore will be transferred to the books of Datacom.

Mr Dhoot denied this too. “It is denied that any deal involving HFCL Infotel’s telecom operations in Punjab being merged with Datacom has taken place with Mr Mahendra Nahata,” he said.

He said Datacom has engaged Morgan Stanley to find a strategic partner, but refused to name any likely foreign partner due to the non-disclosure clause with Morgan Stanley.

The negotiations between Mr Nahata and the Dhoots had been deadlocked for close to 15 months with Mr Nahata demanding Rs 2,116 crore for his stake.

Last year, he had rejected an offer by the Dhoots to buy him out for Rs 1,360 crore. The valuations of telecom companies, which got licences last year, have crashed over the past nine months.

Datacom, which commanded a valuation of nearly $3 billion in early 2008, is now valued by analysts at around $1 billion. It had announced that it would begin operations in Chennai by August 2008, but the deadline was postponed to December 2008.

The company failed to meet this too. The standoff between the partners had also resulted in several potential international investors refusing to buy into the company.

UAE’s Etisalat held several rounds of talks with Datacom, but eventually picked up 45% stake in another new telco Swan for $900 million.

Some foreign telcos had even set a pre-condition that they would only invest in Datacom after both the warring stakeholders exit the firm.

The foreign telcos then wanted to bring in their own Indian partner to hold 26% in the telco. Indian regulations allow 74% foreign direct investment in the telecom sector.

Swan Telecom re-named

The Hindu Business Line on June 10, 2009

New Delhi, June 9

Swan Telecom, which was among the new players to get telecom licences, has been re-named as Etisalat DB Telecom India Pvt Ltd. The board of Etisalat DB announced the change of name of the Indian company, a joint venture between Etisalat and DB Realty, on Tuesday. The company is headquartered in Mumbai. Etisalat DB India has been awarded the Unified Services Access Licence in 15 circles including Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Mumba i, Punjab, Rajasthan, Tamil Nadu (including Chennai), Uttar Pradesh (East), Uttar Pradesh (West), Madhya Pradesh and Bihar.

These licences enable the company to provide a full spectrum of telecom services covering a population of over 900 million across India. Under the licence, the Company can also provide Internet telephony, Internet and broadband services.

Related stories at

• http://www.ciol.com/technology/mobility/news-reports/swan-telecom-is-now-etisalat-db-telecom/11609120848/0/

COAI Gets New Executive Council For 2009-10

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

Tuesday, June 02, 2009: The Cellular Operators Association of India (COAI), the main telecom industry lobby group of India, has announced a new executive council which has taken over the reins of the industry association. Suneeta Reddy, chairperson, Aircel Ltd and vice chairperson, COAI has been appointed as chairperson of COAI. Also Sanjay Kapoor, deputy CEO, Bharti Airtel has now become the vice chairperson of COAI for 2009-10.

During the COAI Annual General Meeting held on 29 May 2009 at New Delhi, outgoing chairman Asim Ghosh thanked the members for their unwavering support during his tenure as chairman. He reminisced fondly about his long association with the industry and the several challenges that the industry had faced and overcome in the last decade.

Ghosh noted that 2008 was a landmark year for the Indian industry as it had reached global scale. He pointed out that the job was never done and there would always be challenges ahead. He thanked Suneeta Ready for her support as vice chairperson, the executive council and the secretariat team for their efforts and contributions and wished them all the very best for the future.

Suneeta Ready, the chairperson elect, thanked the members for the trust and faith reposed in her. She emphasised that COAI had always stood for inclusive growth. She pointed out that the agenda for industry for the next 12 months included ensuring availability of adequate 2G spectrum, an early auction of 3G and BWA spectrum to facilitate the leap to the next generation of services, bridging of the digital divide, improving the financial viability of the industry and making it globally competitive.

Suneeta pointed out that with the imminent introduction of mobile number portability, the SIM card would become like a vote that could be exercised anytime by the consumers, and the industry should make all efforts to ensure that mobile is viewed as a service that adds value to the consumers lives.

The main members of COAI are: Aircel Ltd, Bharti Airtel Ltd, Datacom Solutions Pvt Ltd, Idea Cellular Ltd, Loop Mobile Ltd, Reliance Telecom Ltd, S Tel Pvt Ltd, Swan Telecom Pvt Ltd, Tata Teleservices Ltd, Unitech Wireless Pvt Ltd and Vodafone Essar Ltd.

Story at Financial Express on 30 May, 2009

New Delhi: The COAI Annual General Meeting held at New Delhi saw a smooth transition with the new Executive Council taking over the reins of the industry association.

The event saw the General Body ratify the nominations of Ms. Suneeta Reddy, Chairperson Aircel Ltd. and Vice Chairperson, COAI as Chairperson, COAI and Mr. Sanjay Kapoor, Deputy CEO, Bharti Airtel as Vice Chairperson of COAI for 2009-2010.

The nominations for the Executive Council were also ratified by the General Body.

Outgoing Chairman, Mr. Asim Ghosh thanked the members for their unwavering support during his tenure as Chairman. He reminisced fondly about his long association with the industry and the several challenges that the industry had faced and overcome in the last decade. He also noted how 2008 was a landmark year for the Indian industry as it had reached global scale. He pointed out that the job was never done and there would always be challenges ahead.

DoT against lock-in for promoters equity; mergers on cards

31 May 2009, 1053 hrs IST, PTI on http://www.economictimes.com

NEW DELHI: The fast growing telecom sector is set to witness another round of mergers and acquisitions

with the DoT recommending against lock-in of promoters’ equity, saying this would only hamper growth and competition.

The committee for finalising the views of the Department of Telecom (DoT) on lock-in period for promoters’ equity is understood to have submitted its report in this regard.

“Despite exponential growth and intense competition, the telecom industry even after 15 years of operation is cash flow negative. Capital efficiency of the sector is an important pre-requisite for achieving consumer interest in a sustainable manner.

“Further growth and coverage of the rural and remote areas would entail huge investments. Against the backdrop of economic downturn, it is a challenge to raise investible funds, and there is a need for valuable foreign investments,” the committee said.

“The lock-in period will only hamper growth of telecom market and competition,” it added.

The issue of lock-in period was raised as some of the new players inducted new partners to garner funds for rolling out network across the nation.

If accepted, this would lead to consolidation of telecom industry and according to analysts the business of mobile services may not be commercially viable in case there are more than four or five operators in a circle.

At present, there are eight to nine mobile operators in each circle and with the teledensity especially in the urban areas crossing 30 per cent, the commercial viability of players is at stake.

The committee also observed that the concept of fly-by-night operators has not been experienced in the telecom arena so far, the report of the committee said.

To call some licencees as fly-by-night operators for undertaking transactions, which are well within their licence terms, “is unfair and there is no need to impose any new condition on any of the access services providers,” it added.

The paid-up capital and networth requirement are prescribed to avoid non-serious and fly-by-night operators.

The committee, thus, recommended that there should not be any new condition regarding Lock-in of promoters equity on any access services licensees for development of telecom sector in India.

Although some of the new players like Unitech and Swan telecom have raised funds by issuing fresh equity to foreign partners but with this recommendation, if accepted, would help others including Datacom and Loop telecom to achieve roll out obligations faster.

Datacom, Sistema to offer $300 mn IT deals

29 May 2009, 0008 hrs IST, Jessica Mehroin Irani & Ranjit Shinde, ET Bureau

MUMBAI: Datacom and Sistema Shyam TeleServices, two new entrants in the telecom space, have shortlisted Wipro, Tech Mahindra and IBM for an IT outsourcing contract of close to $150 million each. This is a boon for the IT service providers at a time when the slowdown has resulted in a drop in the number of books.

Videocon-promoted Datacom has received licences in all the 22 telecom circles in India and is in the process of launching its operations. “Yes, the three (IT vendors) have been shortlisted and are competing for the contract. The deal value has not been finalised,” said VN Dhoot, chairman of Videocon group.

Sistema Shyam TeleServices, a joint venture between Russia’s telecom giant Sistema and India’s Shyam group, is in the process of launching CDMA operations in 18 circles. Though the company did not confirm the names of IT firms, a source in the know said that it has invited bids from the three IT vendors mentioned earlier for IT infrastructure-related services in these circles. Sistema Shyam has recently launched operations in Kolkata taking its total number of active circles to four.

While IBM and Tech Mahindra declined to comment on the development, Wipro officials were unavailable for comment. On the exact structure of the contracts, it was not possible to ascertain that from Datacom. However, Sistema Shyam in an e-mail response, said that it would be a fixed value, short-term contract wherein the IT assets would not be obtained on a lease, but would be acquired by the telco. The scope of work broadly includes data centre construction, applications management services and infrastructure hardware supply and support.

Sistema-Shyam has already outsourced its IT requirements for its existing four circles. “Key vendors, who are working on our various IT projects, are Sitronics, Tech Mahindra, IBM, HP, Wipro and Oracle. Since our IT is based on a centralised model, the projects are uniform for all circles and are not taken separately,” CEO Vsevolod Rozanov told ET.

The new domestic telecom operators have kept the order book running for IT companies that have been hit by the slowdown. Earlier, Wipro had bagged a large full IT outsourcing project from Unitech Wireless worth approximately Rs 2,500 crore over a nine-year period. Most of the new service providers are expected to launch their services in the next 12 months. “We expect operators, such as Unitech, Swan and Datacom to commence by July 2010 given the regulatory pressures,” said India Infoline’s telecom analyst Bhavesh Gandhi.

Telecom M&As set to touch $50 billion within a span of four years

27 May 2009, 0408 hrs IST, SHALINI SINGH, TNN on http://www.economictimes.com/

NEW DELHI: If Bharti Airtel’s proposed $23 to $29 billion merger with South African operator MTN goes through, India’s telecom M&A market will come of age either crossing or getting close to the $50 billion mark within a span of four years.

The telecom sector has seen greater M&A deals than any other segment in the country. Since 2005, 15 M&A deals have been struck, crossing a value of $25 billion. If Bharti pulls off a marriage with MTN, this number can cross $50 billion.

This also reveals that the size of Bharti-MTN deal will be roughly equal to or more than the last 15 telecom M&A deals in the country, though it is different since the transaction size is driven by share-swap rather than pure equity sale.

M&As in the Indian telecom sector started in the late 90s with companies like Bharti, Hutchison (now Vodafone), and Birla-AT&T (now Idea) starting to buy out smaller cellular operators with one or two circle operations. The first large M&A deal began with Tata Cellular merging with Birla-AT&T. This was followed by their acquisition of Escotel and RPG.

Bharti made multiple acquisitions in the late 90′s to 2002. Hutchison first acquired Facel in Gujarat, and then BPL, to expand its footprint in Maharashtra, Tamil Nadu and Kerala.

Of the 15 M&A deals struck since 2005, the largest was Vodafone 67% acquisition of Hutchison Essar for $13.66 billion which placed the enterprise value of Hutchison’s mobile footprint in India at $18.8 billion in 2007.

The second largest deal in terms of valuation was more recently, in December 2008, when NTT DoCoMo bought 26% of Tata Tele for $2.7 billion, representing an enterprise value of $10.38 billion for Tata Tele.

Many Indian companies have sold stakes on more than one occasion, and between 2005 and 2008 the valuations of these companies have steadily gone up. Tata Teleservices, which received a valuation of $10.38 billion from DoCoMo in 2008, was valued at a mere $1.27 billion by Temasec in August 2006 when it parted with 9.9% stake.

Similarly, Providence and TA Associates valued Idea Cellular at approximately $3.9 billion at 2006-end. Subsequently, in mid-2008, Telecom Malaysia gave Idea an enterprise value of $7.6 billion and acquired 14.9% stake.

Two of the most recent acquisitions include Telenor in Unitech and Etisalat in Swan neither of which had, at the time of the acquisition, any subscribers or operations in India. These deals were valued at $1.7 billion and $2 billion respectively.

It is clear that India is one of the most attractive markets representing huge growth potential over the next five years. DoT, in its latest spectrum report, has forecast one billion mobile consumers by 2014. This would mean an average addition of 10 million subscribers per month for the next five years.

It is also clear that no market in the world can sustain 12 to 13 operators per circle which is currently the case in India. It is expected that in line with the M&A deals over the last three years, further consolidation is on the cards in the near future. Most telecom experts forecast three to four national players with two or three regional operators over the next two to three years as average revenues per user decline, markets start to slowly saturate, and mobile telephony moves from the current land grab mentality to a fight for switching high-paying customers between competing mobile networks.

It is, however critical that for India to move to an efficient number of market players from the present overcrowding, the government immediately start to review its April 2008 telecom M&A guidelines which place severe restrictions on inter-circle mergers within the first three years.

Etisalat-Swan gets DoT NoC to buy Allianz Infra

27 May 2009, 0113 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: Telecom service provider Etisalat-Swan has bought out Allianz Infratech, marking the first acquisition among the new companies who were given telecom licenses last year. Etisalat-Swan has also got a ‘no-objection certificate’ from Department of Telecom (DoT) for the deal, which is estimated to be worth a few hundred crores.

Allianz had applied for telecom licences on a pan-India level, but was given permission to launch services in only two circles — Madhya Pradesh & Bihar. Swan, which has bagged licences to operate in 13 of the 22 telecom zones in India, is not present in these two circles. Allianz Infratech is promoted by four individuals — aviation entrepreneur Ajay Singh, Ashish Singh, Praveen Singh and Ashish Deora, who hold 25% each in the company. Last year, UAE’s Etisalat had picked up a 45% stake in Swan for $900 million.

ET had first reported in its edition on September 25, 2008 that the Swan-Etisalat combine would buy out the telecom licences held by Allianz Infratech. Following the deal, Etisalat-Swan, which is expected to launch services soon, will be able to provide telecom facilities in 15 circles covering over a billion people. Allianz has become the first of the new entrants to sell out. Its promoters have opted to sell out even as the government is debating lock-in clauses to prevent new entrants, who got licences at prices fixed in 2001, from cashing out.

Last year, Allianz Infratech failed to make the cut to bag a pan-India telecom licence as its net worth was lower than the mandated Rs 1,350 crore. It was later awarded licences for only two circles. There have been allegations that the DoT had given licenses in two circles to Allianz in order to allow Etisalat-Swan to buyout the company and expand its footprint.

While Allianz paid about Rs 30 crore as entry fee for these two circles, the value of these licences would be multiples of that amount. For instance, Swan paid about Rs 1,400 crore for its licences in 13 circles, but offloaded 45% stake to UAE’s Etisalat for $900 million (Rs 4,500 crore).

The DoT, in a communication to Etisalat, said that it was granting a ‘no objection certificate’ for the merger subject to both companies meeting all regulatory requirements. Etisalat-Swan will also get the 4.4 MHz of start up radio frequencies that is held by Allianz in both the circles. The DoT has also asked Etisalat-Swan to submit a fresh proposal for the merger after the deal has been approved by the High Court or tribunal.

Telecom sector leads M&A activity in India

Thomas K Thomas on The Hindu Business Line dated 27 May 2009

New Delhi, May 26 The telecommunication sector has been a significant driver of mergers and acquisitions (M&A) in India accounting for the highest share of deals at 18.6 per cent and 22 per cent during the last two years with values of $5.7 billion and $11 billion in 2008 and 2007, respectively. If the $23-billion Bharti-MTN deal goes through, then the trend is expected to continue this year as well.

Mr Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, says: “This one deal worth $23 billion will almost match the value of the 280 cross-border mergers and acquisitions last year at $25 billion. It marks the grand entry of India as an acquirer in the international telecom industry, just as previous years saw India Inc. buying into international steel, auto and IT industries.” The value of M&A deals during the first four months of 2009 totalled $2 billion.

There have been a string of investments in Indian telecom companies since last year. This includes the deals between Tata Teleservices Ltd and NTT DoCoMo, Inc.; Unitech Telecom and Norwegian telecom firm Telenor ASA at $1.36 billion; Swan Telecom and Emirates Telecommunications Corp (Etisalat) at $900 million; and Bahrain Telecommunications Co and S Tel Ltd for $225 million.

Next in line
The Bharti-MTN deal could trigger similar deals in the Indian telecom space. Other operators, including Reliance Communications, Loop Telecom, Datacom, Idea Cellular and Aircel, could be the next to strike a deal with a foreign player.

A number of international operators, including AT&T, Kuwait-based Zain Group, Qatar Telecom and Telecom Italia SpA, are looking to enter the fastest growing telecom market in the world. Analysts say that M&As in the Indian telecom space could pick up pace because on the one hand domestic players are looking at foreign money to fund expansion plans and on the other international operators are exploring ways to move into emerging markets with their home market reaching saturation.

DoT panel opposes lock-in on stake sales

21 May 2009, 0336 hrs IST, Kalyan Parbat & Joji Thomas Philip, ET Bureau

KOLKATA/NEW DELHI: A government panel is opposing a safeguard measure aimed at preventing owners of companies which acquired telecom licenses in early 2008 from making windfall profits, laying itself open to criticism on an issue which has already resulted in a lot of controversy. The department of telecom’s (DoT) high-powered committee is citing the long-term interests of the sector to argue against the telecom regulator’s recommendation of a three-year lock-in on stake sales by the owners of companies which were allocated spectrum allegedly at throwaway rates.

The Telecom Regulatory Authority of India’s (TRAI) recommendation was made in March based on a proposal by DoT. A panel of the department is now objecting to the regulator’s suggestion. The telecom department will soon ask the regulator to reconsider its recommendation. The government does not have the power to overrule Trai without first referring the matter back to the regulator. But in case Trai refuses to change its stance, the government can go ahead and do away with the lock-in requirement. DoT’s high-powered committee, which was asked to take a final call on TRAI’s views, said in a report dated May 9 that the lock-in should apply only to future telecom licensees and not any of the existing players.
“In case the lock-in condition is at all to be introduced, under no circumstances should it be enforceable with retrospective effect for existing license holders. Such lock-in, if introduced by the government, should only apply in case of new licensees and be incorporated into the future license conditions,” the panel wrote. Among those who will benefit from the panel’s view are Datacom, Swan, Unitech, Loop and S Tel, which acquired their licenses in early 2008. A top DoT official confirmed that its internal committee was against the lock-in and that the matter would be referred to Trai after the new minister takes charge.

Faced with severe criticism of the then telecom minister A Raja’s decision to award pan-India licenses for Rs 1,651 crore (about $400 million), a price fixed in 2001, DoT had proposed amending licensing norms to impose a 3-5-year lock-in on the sale of promoters’ equity for new entrants. DoT referred this proposal to TRAI. The telecom regulator agreed with the communication ministry’s proposal saying that the main objective was “to block the unearned gains arising from transaction in stakes of promoters, particularly when the value of spectrum is not getting correctly reflected in the entry fee.”

Going a step further, TRAI has also asked DoT to seek the finance and the law ministries’ views if the three-year lock-in can be imposed retrospectively. But TRAI had also clarified that the lock-in would not apply if these telcos were to issue fresh share capital to investors and foreign telcos.

This implies that even in the event of a lock-in, it would not have impacted the deals which have already been entered into by companies such as Swan and Unitech.

Swan offloaded a 45% stake to UAE’s Etisalat for $900 million and Unitech divested up to 67.25% in its telecom venture to Norway’s Telenor for $1.1 billion. These companies maintain that they did not offload stakes but only issued fresh equity to the foreign partners.

MTNL has maximum spectrum at 12.4 Mhz in Delhi, Mumbai

19 May 2009, 1902 hrs IST, PTI on www.economictimes.com

NEW DELHI: State-run MTNL has received the highest amount of spectrum in Delhi and Mumbai at 12.4 Mhz as on March 2009 while private GSM operators Bharti and Vodafone are not far behind at 10 Mhz each in the same period.

Bharti and Vodafone have 10 Mhz each in Delhi. But most importantly, the private operators have got 8 Mhz each in the key 900 Mhz band while MTNL has got 6.2 Mhz on the same band. 900 Mhz is the most efficient band which can accommodate large chunk of subscribers. As per the data compiled by the Department of Telecom’s spectrum division, Idea has got 8 Mhz of spectrum on 1800 Mhz band in Delhi.

In Mumbai, MTNL has got 12.4 Mhz of spectrum with 6.2 Mhz each on the 900 and 1800 Mhz band while Vodafone has got 10.2 Mhz followed by BPL at 10 Mhz and Bharti at 9.2 Mhz. Host of new operators including Swan, Datacom, Unitech and TTSL have got 4.4 Mhz each.

BSNL holds 10 Mhz of spectrum in most of the circles it operate such as Kolkata, Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Tamil (Chennai), Kerala, Haryana, UP (East & West), Madhya Pradesh, Himachal Pradesh, Bihar, Orissa, Assam, North East, Jammu & Kashmir.

DoT panel limits quantum of spectrum to 25% in a circle

At www.thehindubusinessline.com on Monday, May 18, 2009

New Delhi, May 17: The committee set up by the Department of Telecom to review the spectrum allocation policy has suggested that no operator should be allowed to own more than 25 per cent of the total available radio frequency in a circle.

“A Unified Access Service licence holder cannot have spectrum holding of more than 25 per cent of the total assigned spectrum in the 2G spectrum bands in each licences service area, irrespective of mix technologies deployed.”

“Spectrum may be transferred/merged in any quantity any time after assignment subject to the condition that the merged entity cannot have spectrum holding of more than 25 per cent of the total assigned spectrum in the 2G bands in each circle,” the committee said in its report submitted to the Government last week.

Prevent hoarding
This will make merger and acquisition in the telecom sector even tougher. DoT officials said the move is aimed at preventing hoarding of spectrum by a single operator. The committee has also proposed to impose a spectrum transfer fee of Rs 550 crore for pan-India licence.

Initial cap
The committee has also capped the initial start-up spectrum to new players at 4.4 Mhz for GSM operators and at 2.5 Mhz for the CDMA operators. All fresh allocation after that will be done through auction. This will have an impact on the new players that got their licences in 2008. Operators, including Reliance Communication, Swan and Shyam Sistema, may not get any additional spectrum based on subscriber-linked criteria.

Wipro set to bag another telco IT deal

9 May 2009, 1210 hrs IST, N Shivapriya & Rashmi Pratap, ET Bureau
MUMBAI: Wipro, which has already bagged two large IT outsorcing contracts from telcos, is among the shortlisted contenders for another large outsourcing deal, this time from Swan Telecom. The other vendors that have made it to the shortlist include IBM and Tech Mahindra. UAE-based operator Etisalat owns 45% stake in Swan Telecom.

If Wipro wins this deal, the IT major would have won as many large outsourcing deals from telcos as IBM. Earlier this week, Wipro announced a nine-year deal with Unitech Wireless estimated at Rs 2,500 crore. In January 2008, it bagged a $600-million deal from Aircel Cellular. This deal is expected to be as large as the Unitech Wireless contract, said industry sources.

IBM has large outsourcing contracts from Bharti Airtel, Vodafone and Idea Cellular. Till the Aircel deal, it had a dream run, bagging all the large deals from telecos. Close to seven vendors had bid for the Swan Telecom contract, but about four of them could be in the final shortlist, said an industry expert, who did not wish to be named. He said operators may prefer outsourcing to a player other than IBM for competitive reasons. “Wipro could be a favourite to win because IBM already has three large operators with it. So, new operators may prefer not to go with it. Tech Mahindra’s niche focus may work against it in such contracts because the operators want vendors with a broad area of expertise,” the expert said. Compared to Wipro, Tech Mahindra is also a relatively new entrant into the domestic market.

Swan and other new operators are negotiating their IT contracts ahead of their equipment orders. In a response to a query on the company’s IT outsourcing plans, a Swan Telecom spokesperson said: “We are currently in the preparatory stages and will announce our plans for the Indian market at the appropriate time.” In a response to an email from ET, Wipro said: “Wipro does not comment on speculations and as a policy, we do not comment on specific clients or business.” New entrants like Unitech, Swan, Datacom and Loop are liable to pay penalty if they don’t launch services even after 52 weeks of spectrum allotment. Beyond 52 weeks, there is a grace period of three weeks. “We evaluated Wipro on all parameters — financial and commercial — and found the company extremely competitive. Also, being new in the (telecom) vertical, they brought a lot of freshness in approach and innovative ideas. We went about it objectively and Wipro had the team and infrastructure to support the project,” Aircel COO Gurdeep Singh had told ET about why the company decided to outsource to Wipro.

DoT reviewing M&A guidelines

May 2009, 0026 hrs IST, Shalini Singh, TNN

NEW DELHI: The telecom sector is set for consolidation in mobile telephony with DoT sources revealing that a special committee set up to re-evaluate spectrum pricing is also reviewing the M&A guidelines.
If the renewed guidelines come through in the next few months it will indicate an important shift in policy direction. Presently, the M&A guidelines discourage mergers between two operators holding mobile spectrum. Confirming this, a senior DoT official told ToI, “The DoT is reviewing the M&A guidelines of April 2008.” The DoT in its report has noted that “issuance of many licences and spectrum has fragmented the spectrum space beyond optimal limits. In this scenario, a policy approach would be to have an enabling policy, so that consolidation of the market and hence spectrum takes place through merger of licences and transfer of allotted spectrum from one licensee to another.” The department is considering a transfer fee to ensure that the “licensee does not make a windfall gain simply by trading his scarce commodity.” According to the report, the government has to cede its assumed role as an arbitrator of appropriate use of spectrum to the market, retaining some very broad discretionary powers in the event of gross violation of licence conditions. Secondly, the government will have to accept moderate windfall gains to operators by allowing trading with an associated transfer price. Current M&A guidelines discourage mergers by requiring surrender of spectrum with a merged entity if the subscriber numbers do not support the total spectrum. This condition will be done away with as India slowly moves away from subscriber-linked criteria for spectrum allocation. As a result of the M&A guidelines new companies, like Loop and Datacom were unable to merge their businesses with existing operators or combine with new entrants. The change will now allow such companies to sell their licences and spectrum to not only new entrants as in the case of Unitech/Telenor and Swan/Etisalat but also some existing operators who are facing scarcity of spectrum. Before the 120 new licences were given the average GSM spectrum per operator was at 7.4MHz. This has come down to 5.7MHz in the current scenario. As the M&A guidelines fall apart, it is quite clear that India will once again settle at six to seven operators with about five pan-India operators and a few regional players.

Telcos give equity details to TRAI

6 May 2009, 0024 hrs IST, Amrita Nair-Ghaswalla, TNN

MUMBAI: Since the last round of allotment of telecom licences in India in 2008, five of the six who were given the Unified Access Service (UAS) license, have changed their equity structure, some drastically. Datacom Solutions, a JV between the Dhoots of Videocon group and HFCL, has not gone for any change in shareholding structure. On the other hand, Chennai-based S-Tel that saw an over seven-time jump in its equity base, papers and information available with TOI showed.To ensure that the new telcos do not make a killing by selling stakes even before they launch their services, the Telecom Regulatory Authority of India (Trai) had asked the six companies to clarify their equity structure. According to official papers, S-Tel showed a 667% growth in equity capital from the time of applying for the license to its current status, while another reported a 439% growth. Yet another recorded a 135% growth. “The catalyst was the rapid change in the equity structure of Swan Telecom and Unitech Wireless, widely reported in the media,” official sources told TOI. “Without starting operations, many players had actually made a handsome profit,” sources added. Likewise, at the time of applying, Loop Telecom had an equity share capital of Rs 131 crore which was subscribed by two Indian promoters–BPL Mobile and BPL Communication in a 51.24-48.76 ratio. Subsequently, the company told Trai that it had issued additional equity shares, thereby increasing its equity share capital to Rs 308 crore. The firm informed that around Rs 74 crore was contributed by a third foreign entity, Capital Global. S-Tel, which holds licences to operate in several northern and eastern states, had an equity capital of Rs 18 crore at the time of applying for a license. This was subscribed to by Skycity Foundation, an Indian entity and Telecom Investment Mauritius, in the ratio of 51:49. As on December 2, 2008, the company informed that its share capital had increased from Rs 18 crore to Rs 138 crore (indicating a growth of 667%). A third party, Sahara India Investment Corp entered the scene. Sistema-Shyam applied for UAS licence on September 25, 2007. The Indian promoter had an equity holding of 70%, while the foreign promoter Sistema Joint Stock Financial Corporation (SJSFC) held 10%. Total equity capital was Rs 456 crore. On January 18, 2008 and then on June 6, 2008, SJSFC increased its equity to 51% and 72% respectively. Subsequently, additional equity shares were issued by the company thereby increasing its share capital to Rs 2,456 crore. Presently, SJSFC holds nearly 74% of the equity, the company told Trai. Swan Telecom had two investors while applying for the UAS licence–Tigor Trustee and Reliance Telecom, in the ratio of 90.1% and 9.9% respectively. Subsequently, vide a letter to DoT on December 7, 2007, Reliance Telecom divested its equity capital as well as the preferential shares in the company. After divestment, the shares of the company were held by Tigor Trustee (90.1%) and Delphi Investment (9.9%), a foreign entity. Since Unitech Wireless initiated an equity change only on April 9. 2009, it has informed Trai that an analysis would be sent over shortly. Datacom Solutions has intimated that there is no change in the equity structure of the company.