Handsets: Maharashtra Organised trade to feel the heat

Akhilesh Shukla on Voice&Data, June 15, 2009 Published June 16, 2009

The proposed hike of VAT to 12.5% on mobile handsets in Maharashtra could hit the organised trade in the Maharastra. Organised trade, which is already hit by higher property rates, shirking margins and high trained employee cost and other operational costs, would loose customer to the unorganised trade.

The decision, on the other hand, will force the unorganised retail industry to switch trade in grey to survive. The sale of grey handsets, especially of higher end model will become more profitable for them and help them to maintain footfalls, as well.

In case the decision came into force, the price of handset costing Rs 20,000 will go by Rs 25,000. Buyers will prefer to buy the phone from grey market, as the difference would be phenomenal.

The organised trade contributes to 13% of the over all handset retail market in India. However, as per number of outlets they occupy 3% of the pie. The handset retail market is slowly and gradually moving towards organised trade. But the state government’s decision will hamper the shift.

Maharastra and Mumbai is one of the biggest handset retail market in the country commanding more than 13% of the market share in the country. As per the current market estimates around 120 mn handsets are sold in the country every year, Of which, 15.6 mn are sold in Maharastra alone.

As per Indian Cellular Association the state government, which is eying a huge revenue from VAT on handset, will loose money as well. ICA says that the state stands to loose at least 473.6 crore in the next three years, if the proposed 12.5 per cent VAT is implemented because of increased sale in the grey market.

The pioneer in mobile handset retail in India The Mobile Store is headquartered in Mumbai and have a strong presence in the region. Besides, HotSpot, another market leader, have a strong presence in the country.

See also: VAT hike on handsets may bring in less tax for state at https://telcobizpedia.wordpress.com/2009/06/08/vat-hike-on-ha…-tax-for-state/

 

Gitanjali group in talks to pick up major stake in MobileNXT

Swetha Kannan, Anjali Prayag on The Hindu Business Line, June 13, 2009

Bangalore, June 12 Jewellery major Gitanjali group is in advanced talks to pick up a major stake in the Bangalore-based mobile retail chain, MobileNXT.

Confirming this to BusinessLine, Mr Vijay Menon, Founder Director, MobileNXT, said there was a proposal from Gitanjali to invest in MobileNXT. While it is also talking to a few others, discussions with Gitanjali are in an advanced stage.

In response to an e-mail query to Gitanjali, a company spokesperson said, “We are in talks with various companies and it would be premature for us to comment on anything at this stage.”

Currently, media company TV18 holds one-third stake in MobileNXT, while the rest is held by the promoters, Mr Romy Juneja and Mr Menon.

MobileNXT has so far obtained venture capital funding to the tune of $8 million in two tranches and is close to breaking even, said Mr Menon. “We need investor help with that,” he added. If and when a strategic investment is made, the stakes held by everyone will be diluted. More details will emerge as and when a deal is struck.”

Currently, there are 30 MobileNXT retail outlets in tier 2 and 3 towns in the country – mainly in Karnataka and Tamil Nadu, apart from a few stores in Punjab, Gujarat and Kolkata.

Given the market conditions, MobileNXT wants to focus on consolidation of existing stores rather than engaging in store expansion.

“The mobile phone business is a high volume business but margins are low. Our strategy now is to raise capital and make ourselves profitable,” said Mr Menon.

 Towards this, MobileNXT plans to retail complimenting products in the personal accessories space such as eyewear, watches and even jewellery, said Mr Menon.

For the financial year ended March 2008, MobileNXT clocked a turnover of Rs 30 crore.

Gitanjali group is a $900-million company with interests in jewellery manufacturing and retail.

BSNL in pact with Akshaya centres

The Hindu Business Line on June 11, 2009

Thiruvananthapuram, June 10

The `Akshaya centres’ in the State will now sell various products of public sector telecom major Bharat Sanchar Nigam Ltd (BSNL). According to an official release, the 2,086 Akshaya centres will sell BSNL’s India Telephone Cards, SIM cards for BSNL’s mobile service, recharge coupons, CD-ROM directories and so on. BSNL and the Kerala State IT Mission recently signed a memorandum of understanding in this regard, the release said. – Our Bureau Thiruvananthapuram, June 10

Prem Kumar To Head Meridian Mobile’s India Operations

From www.efytimes.com on June 10, 2009

Wednesday, June 10, 2009:  UK-based mobile handset maker Meridian Mobile has appointed Prem Kumar as chief executive officer for its India operations. With India having embarked on a renewed growth phase, Kumar has come from the board of the parent company to focus on spearheading the company’s growth strategy for India given the emerging landscape and the new opportunities afforded by the telecom sector.

Kumar brings with him over twenty-seven years of experience in consumer goods, technology and management consulting, in both India and abroad. He has spearheaded growth of companies in regions like Europe, USA, Russia, China and South-East Asia, amongst others. Though a visitor to India in the past, Kumar now returns to be based here after nearly fifteen years abroad.

Meridian Mobile has now made the Fly mobile phone available in 25 countries, including Europe, Russia, China, and South-East Asia, apart from India. Fly is now available in over 7,000 mobile retail stores across 145 cities in India.

“Our business is a bit broader than just providing network or pipes”, says Sunil Joshi

From India Telecom News on June 10, 2009

Sunil Joshi, President, Tata Communications Enterprise Business, Emerging Markets says: “Our business is not a single line of business. We have multiple lines of business to de-risk ourselves in how we engage. We have a voice business which, by virtue of that, we are the world’s largest wholesaler of voice. “

“And about 24 billion minutes of voice run on our backbone. Now what that gives us is steady cash flow to run and operate our business and invest in other areas of growth. Our global data and mobility services business is the next largest business, which is a growth business for us. That has grown 29% year-on-year. ”

The voice business grew 12% year-on-year. This is the last 12 months, the fiscal year ending 31st of March, 2009. Our EBITDA in the last year has grown 53% year-on-year.

So there are two things. You are right about the cost pressures because the deregulation drives prices down. And our legacy organisation was such that they enjoyed the benefit of a really regulated market. But in a competitive world, it does have impact to the prices, which does end up going to the consumer or the business that leverages that service. Then it’s for us to optimise our infrastructure, whether, it’s our IT, our engineering, our procurement. And we’re spending a lot of time in making sure that our costs are managed, while the price points are also seeing pressure to come down in the marketplace. This is within India, specifically.

We also have some growth engines, what we call start-ups, if you like. So our investment in NeoTel in South Africa, we have increased our stake last year from 26% to 56% in NeoTel. NeoTel is the second largest telecommunications company in South Africa. And that’s part of our emerging market strategy. A lot of our enterprise customers are looking at the African continent to now look at also growth, while they’re looking at Asia and some of the other economies.

So to back that up, we are also investing in what we call the [Seacon] cable. Seacon cable is expected to come up in the next month or so. And that will enable connectivity from Mumbai, right across the east coast of Africa, to South Africa. We’ve also announced an investment in [WACS], which is the West Africa Cable System. And that will take the connectivity of South Africa on the west coast of Africa into Europe, thereby connecting what is the other new emerging geography. And you’ll find that that enables us to connect enterprises and carrier customers and continue to drive our revenue [through].

The few other small organisations, like the broadband unit that we have, [TCISL], which is predominantly focused on retail broadband and the growth. And we have about 315,000 subscribers on the retail broadband [shop] and growing. We have investments in other small organisations, an in-house subsidiary called [TCTSL]. It’s Transformation Services Limited. So what that does is, it supports telecommunications organisations and outsources that with the [BSS] infrastructure.

So our business is a bit broader than just providing network or pipes. And with that infrastructure providing value-added services and managed services, it allows us to continue to move up the value chain for our customers. Sorry about the long answer to that.

VAT hike on handsets may bring in less tax for state

8 Jun 2009, 0003 hrs IST, Rashmi Pratap, ET Bureau

MUMBAI: The decision of the Maharashtra government to hike VAT (value-added tax) on mobile handsets could actually result in a drop in the state’s VAT collections, says Indian Cellular Association, the industry body for handset manufacturers.

In the state budget, the government last week proposed to increase VAT to 12.5% from 4% on mobile handsets without making the revenue targets from the move public.

According to ICA, the proposed hike in VAT will result in handset sales falling in the organised retail sector in Maharashtra. It is currently at 1.25 crore units annually and could reduce to as low as 8 lakh units. With reduced sales, the estimated VAT collection will also be down from Rs 168 crore annually to Rs 33.5 crore, as per ICA estimates.

Over a three year period, the Maharashtra government will lose around Rs 475 crore in revenue, if it imposes the proposed hike in VAT on mobile phones. The move will trigger increased grey market sales and could expose customers to phones of dubious quality. “A common man, who buys a Rs 1,500 entry-level phone will now have to pay Rs 127 more.

Our experience shows that Rs 30 is the point at which the consumer turns away from the official market to the grey market. If the proposal is implemented, retail outlets will be under pressure,” ICA national president Pankaj Mohindroo told ET. ICA has also written a letter to Maharastra chief minister Ashok Chavan requesting the government to take a closer look at the issue. Importantly, Maharashtra is the only state in the country to have a 12.5% VAT on mobiles — it is 4% in other parts of India.

According to industry estimates, Maharashtra has about 20,000 retailers and over 450 distributors. Over 1.5 lakh people are employed. “If the grey market resurfaces, the employment in the industry will be hurt, Mr Mohindroo said.

Infiniti Retail CEO & MD Ajit Joshi said at a time when mobile phone penetration was increasing, even in rural areas, such a step would not be viewed as positive.

“The government’s aim of taking broadband to rural areas will not be met, if handset prices go up due to the increase in VAT because Indian consumers are extremely price sensitive,” he said. Infiniti, a 100% subsidiary of Tata Sons, owns and runs the Croma chain of consumer electronics and durables. “Also, the government has clubbed mobiles with liquor and cigarettes, which also attract a 12.5% VAT. However, mobile is a tool for connectivity and not a luxury item,” Mr Joshi said.

Rajiv Agarwal, CEO of Essar-owned The MobileStore, said telecom is an essential part of the India growth story and has a direct connection with development. “One state having a differential VAT will create an anomaly. People will buy from neighbouring states and sell here. It is not beneficial for customers, who want warranties,” he said. He added that the decision was not one that augured well for the industry.

See also: Handsets: Maharashtra Organised trade to feel the heat at https://telcobizpedia.wordpress.com/2009/06/15/handsets-mahar…-feel-the-heat/

 

HotSpot to invest Rs 200 cr for retail expansion

Business Line; Sat 16 May 2009

Bindu D. Menon
New Delhi, May 15 Mobile retail chain HotSpot is scouting for acquisition to strengthen its presence in the organised retail space. The company, which recently had acquired stake in Cellucom, is looking to invest Rs 200 crore for its retail expansions.

Pan-India presence
“Currently, we are perceived as a North-centric organisation. We are looking at acquisition which will bring a strategic fitment, besides increasing our pan-India presence. For this year, we will be increasing the number of stores from 620 to 1,200 by the end of this year,” said Mr Sanjeev Mahajan, CEO, HotSpot.

With Cellucom’s acquisition, HotSpot has got about 120 stores under its umbrella.

HotSpot is part of Spice Televentures, a BK Modi group company, and is a retailer of mobile phones, accessories and services.

Core focus
The company said its core focus will be on total customer offerings. “It is not just handsets and airtime retailing that we are looking at but also focusing on a lot of value added services including accessories and portable music devices including iPods,” Mr Mahajan said.

On whether slowdown had affected sales, he said margins for all retailers were under pressure. “There are no upgrades. People are not buying at the same frequency that they used to,” he added.

HotSpot also plans to expand its outlets in rural areas. “Tier-III cities and towns will be our next drivers of growth,” he added. The company, which recently had acquired stake in Cellucom, is looking to invest Rs 200 crore for its retail expansions.