Mittal, MTN chief meet Pranab, Khurshid to discuss merger

On 25 Aug 2009, 0720 hrs IST, ET Bureau at http://economictimes.indiatimes.com/Mittal-MTN-chief-meet-Pranab-Khurshid-to-discuss-merger/articleshow/4931103.cms

NEW DELHI: Bharti group chairman Sunil Mittal and South African company MTN’s chief executive Phuthuma Nhleko met finance minister Pranab Mukherjee and minister of state for corporate affairs Salman Khurshid on Monday, triggering speculation about the motive for the meeting days after the merger partners extended exclusive talks for their proposed $23-billion deal.

The meeting with the finance minister comes just three days after both the telcos extended their exclusive merger talks by another month to September-end.

Mr Khurshid said the meeting was just a courtesy call by the honchos to appraise the ministry on the merger talks. Terming the proposed deal as a very big opportunity for the country, he said: “They are in touch with the regulators and the finance ministry. Our (ministry of corporate affairs) role comes at a later stage.”

The nature of the discussions with Mr Mukherjee was not disclosed and both Mr Mittal and Mr Nhleko could not be contacted on this issue. Mr Mukherjee was not available for comments. Officials at the ministry, too, declined to disclose the agenda for the meeting.

The largest telcos in India and Africa have been involved in exclusive talks for close to three months to create the world’s third-largest communications firm. The deal’s contours present a complex structure in which both firms would pay cash and equity for stakes in each other. If the deal goes through, Bharti Airtel will get 49% in MTN and the South African telco and its shareholders will get 36% economic interest in Bharti.

Industry analysts say the most probable reason for the highest ranking executives from both the companies meeting the finance minister could be related to the country’s foreign investment cap of 74% in telecom firms. It is also possible that Mr Mittal and Mr Nhleko could have updated the finance minister on the talks between the companies.
The new FDI norms consider a company Indian if Indian promoters hold a majority stake in it and the investments made by such companies in any joint venture or downstream venture will be treated as Indian.

Bharti Airtel, which had close to 70% foreign equity as per the old guidelines, has only about 43% FDI under the new norms. This is because a significant part of the Singapore-based telco SingTel’s 31% holding in the company as well as Vodafone’s entire holdings are routed through majority-owned Indian companies. Even after the deal, the emerging entity will, therefore, have FDI within the prescribed limit.

Despite this, approval from Indian regulators and the government may still turn out to be a tricky issue. RBI has asked the department of economic affairs under the finance ministry to review the new FDI guidelines. Any changes in the FDI norms could force both the companies to restructure the deal. Besides, the foreign investment promotion board, the apex body that clears foreign investments, has not cleared any proposals so far under the new norms due to opposition from the finance ministry.

Analysts, therefore, speculate that the honchos may have sought clarity from Mr Mukherjee regarding the government’s position on the new FDI norms. They feel that the meeting with Mr Khurshid could be related to Bharti’s plans to issue GDRs to MTN shareholders.

The Indian telco’s equity expansion will only be in the form of GDRs that will be listed on the Johannesburg Stock Exchange. This means, MTN’s proposed 36% holding in Bharti Airtel — 25% with the company and the rest with its shareholders — would be in the form of GDRs listed on JSE.

All regulations related to GDRs are governed by the ministry of corporate affairs. Post the deal, both the telcos will have to get a formal approval from markets regulator Sebi, exempting the South African firm from making an open offer for an additional 20% in the Indian company.

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

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.

Wireless Tata Telecom Has Bid for Aircel’s Tower Operations

At http://online.wsj.com/article/SB125084655798248997.html?mod=rss_india_news on August 21, 2009

By DEEPALI GUPTA

MUMBAI — India’s Wireless Tata Telecom Infrastructure Ltd., or WTTL, has made an initial bid for the telecom towers of mobile-phone operator Aircel Ltd., a director of the company that controls WTTL said Friday.

“We are currently studying Aircel assets after making an initial bid,” Quippo Telecom Infrastructure Ltd. Director Sunil Kanoria told Dow Jones Newswires.

WTTL is the second company after GTL Infrastructure Ltd. to confirm an interest in the tower operations of unlisted Aircel, in which Malaysia’s Maxis Communications BHD holds 74%.

Demand for passive network infrastructure such as towers has boomed in India – the world’s fastest-growing telecom market – as new mobile providers opt for leasing the infrastructure to reduce costs and roll out services faster.

Besides independent infrastructure providers such as GTL and WTTL, the other main providers of telecom towers in the country include Indus Towers Ltd. and Reliance Infratel Ltd.

Mr. Kanoria declined to give an estimate on the size or value of the stake WTTL plans to buy. GTL also hasn’t yet announced the details of its bid.

Local media reports have said Aircel was planning to sell a 51% stake in its tower business. Analysts estimate Aircel’s about 12,000 towers are valued at around 5 million rupees-6 million rupees ($102,312-$123,000) each.

Aircel officials weren’t available for comment.

WTTL is the result of a merger of the telecom tower operations of Tata group’s Tata Teleservices Ltd. and Quippo in January. While Tata Teleservices holds 51% of WTTL, its remaining stake and management control is with Quippo.

The company now has about 25,000 towers. At the time of the deal in January, the combined entity had about 18,000 towers, which gave it an enterprise value of 130 billion rupees.

WTTL has a target of having 60,000 towers in two years, excluding any addition from a potential acquisition of Aircel’s tower operations, Mr. Kanoria said.

It plans to spend 50 billion rupees to 55 billion rupees on building towers over the next two years, he said.

The expansion program is well funded for around six months, Mr. Kanoria said. For subsequent expenditure, the company plans to raise funds through debt and may also consider the equity route, he said.

Funds may be raised from existing shareholders or from an institution, Mr. Kanoria said. Eventually the company would look at a public listing, he added, without elaborating.

Unitech unit to launch mobile svcs in Dec qtr- Telecom-News By Industry-News-The Economic Times

Unitech unit to launch mobile svcs in Dec qtr

via Unitech unit to launch mobile svcs in Dec qtr- Telecom-News By Industry-News-The Economic Times on June 16, 2009

NEW DELHI: The telecoms unit of Indian developer Unitech Ltd will launch mobile services with Norway’s Telenor in the December quarter this year, Unitech Ltd’s managing director said on Tuesday.

Unitech Wireless, in which Telenor is taking a 67 percent stake, has got wireless spectrum in 21 service areas, excluding Delhi, in the world’s fastest growing wireless market, Sanjay Chandra told reporters.

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.

MTN may take GDR route for 25% stake in Bharti Airtel

15 Jun 2009, 0014 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: South African telecom major MTN’s proposed 25% stake in Bharti Airtel will be through global depository receipts (GDRs), if the plans by the two companies to mutually acquire equity to form a global cellular alliance stretching from the Cape of Good Hope to the Indian Ocean goes through.

A top Airtel executive involved in talks with MTN told ET that the GDRs will be listed on the Johannesburg Stock Exchange, shedding more light into the complex nature of the deal, which is set to test the new foreign direct investment (FDI) norms earlier this year.

This puts to rest all speculation regarding the deal and implies that the entire equity expansion of Bharti Airtel will be in the form of GDRs issued to MTN and its shareholders. According to the existing plan, MTN will buy a 25% stake in Bharti, while another 11% will be held directly by MTN shareholders.

Bharti, in turn, will acquire a 49% stake in MTN through a complex stock-and-cash deal. The size of the deal is estimated to be worth over $23 billion and both companies had agreed to hold exclusive talks with each other till July 31, 2009. The new company will have revenues of about $20 billion and over 200 million subscribers.

The GDR route scotches the speculation about Bharti Telecom, the unlisted holding company of Bharti Airtel, issuing fresh equity to MTN to give the South African telco a 25% economic interest in India’s largest mobile company. Bharti Telecom holds 45.3% stake in Bharti Airtel, and it was assumed that the deal would see MTN taking about 10% stake at Bharti Telecom with the issue of new shares to MTN.

Additionally, along with a stake in Bharti Airtel’s holding company, it was assumed that MTN and its shareholders would also be offered a combination of equity shares, convertible instruments, warrants at Bharti Airtel under a Scheme of Arrangement. Another model that was speculated about involved Bharti and its promoters including SingTel floating a special purpose vehicle (76:24 or 51:49) for the deal.

The new foreign holding norms give enough headroom for Bharti to route MTN’s entire holdings in it through GDRs on an expanded equity base. This is because, new FDI norms, notified under Press Notes 2, 3 and 4 by the previous UPA government, considers a company Indian-owned if Indian promoters hold a majority stake in it, and the investments made by such companies in any JV or downstream venture are also treated as Indian.

Hence Bharti Airtel, which had close to 70% foreign equity stake as per the old guidelines — where ‘beneficial ownership’ is interpreted to include indirect holding — has only close to 43% FDI under the new norms. This is because a significant part of SingTel’s 31% holding in Bharti Airtel as well as Vodafone’s entire stake are routed through majority-owned Indian companies.

Related stories at

• http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=RSSFeed-Business&id=a45dfe22-9c89-4875-90fd-8b05cd3cbde8&Headline=MTN+may+take+Bharti+stake+through+GDRs

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.

France Telecom & Telstra in talks with Maxis to buy minority stake in Aircel

10 Jun 2009, 0047 hrs IST, Rashmi Pratap & Boby Kurian, ET Bureau

MUMBAI | BANGALORE: France Telecom and Telstra of Australia are in talks with Malaysia’s Maxis Communication to buy a minority stake in Indian telecom operator Aircel, in yet another sign that the ongoing slowdown and credit crunch are having a negligible impact on deal activity in the telecom sector.

The talks between the two overseas players and Maxis revolve around France Tele buying a 20-25% stake in Aircel, a dominant player in Chennai and Tamil Nadu. Aircel, which is one of the major regional players in India, is in the midst of a $5-billion expansion plan that will see it becoming a pan-India player.

Meanwhile, Saudi Telecom, which owns 25% in Aircel parent Maxis, is likely to increase its stake in the company to 35% for about $1 billion. The money from the sale of Maxis’ stake will also be used to invest in Aircel. Goldman Sachs is advising Saudi Telecom in its transaction with Maxis. The deal with Saudi Telecom is expected to be completed within a month.

Estimates of the valuation of Aircel, which has a subscriber base of 19.6 million, vary between $7 billion and $8 billion. France Tele, which is not looking to buy a majority stake, will end up paying about $1.4-2 billion if the deal goes through at this valuation, people close to the development said.

The Indian telecom sector is perhaps one of the few sectors in the economy that is still witnessing strong M&A deal activity despite an economic slowdown. In the past 10 months, about $5 billion of deals have been concluded, including a mega $2.7-billion transaction that saw Japanese giant NTT DoCoMo buying 26% in Tata Teleservices.

Indian telecom companies, too, are growing at a scorching pace with monthly subscriber additions rising to more than 10 million a month. At this rate, Indian subscriber base is expected to leap past the 500 million mark in double quick time.

Aircel on course to widen pan-India reach by June 2010

The continued high growth is of great interest to foreign investors. Impending developments such as auction of spectrum for 3G (third generation) and broadband wireless access (BWA), besides the entry of MVNOs (mobile virtual network operators), offer further growth opportunities,” said Salil Pitale, head (telecom & media), at Enam Investment Banking.

For France Telecom, Europe’s third-largest phone company which owns the Orange brand, it will be an opportunity to re-enter the world’s fastest growing telecom as it faces a slowdown in its home turf and in other mature markets.

In response to an e-mail, an Aircel spokesperson said, “We are not aware of any discussions with France Telecom about this matter. Maxis Communications and its partners remain firmly committed to the accelerated growth and development of Aircel to be a successful pan-India operator.” A France Telecom spokesperson said, “We do not comment on market rumours.”

France Telecom first approached Maxis in August last year, just before the global market meltdown. “At that time, it was also in talks with Tata Teleservices (TTSL). Negotiations with Maxis were revived after NTT DoCoMo clinched the deal with TTSL,” a person familiar with the discussions told ET.

Maxis was also in talks with AT&T last year for selling a similar stake, but the deal could not go through because of differences in valuation. Talks between France Tele are still at a preliminary stage and the deal may also fall through because of Maxis’ insistence that the prospective investor also purchase a small stake from Maxis. France Tele, on the other hand, wants the investment to go into the company, that is Aircel, and is not keen on buying directly from Maxis.

Maxis owns 74% in Aircel while the rest is held by Chennai-based Reddy family, promoters of Apollo Hospitals. France Tele had held a stake in Mumbai-based BPL Mobile for many years before exiting in 2003. In 2007, its group company Orange Business Services acquired GTL’s enterprise and managed services division. Subsequently, it bagged NLD and ILD licences in India. A stake in a mobile firm now will complete France Telecom’s India story.

Aircel is currently in a money-guzzling mode, with the target to complete pan-India footprint by June next year. Ananda Krishnan, the owner of Maxis, also needs money to pump into Natrindo Telepon Seluler, a telecom firm in Indonesia which has a 3G licence. Plus, he bought out NTT DoCoMo from Sri Lanka Telecom in 2007 and that business also requires continued investments.

In a bid to fund these plans, Ananda delisted Maxis in June 2007 in a $12-billion deal and within days, he sold 25% of it to Saudi Telecom for over $3 billion. Due to this, Saudi Telecom has an effective 18.5% stake in Aircel. Dilution of another 25% in Aircel will help Ananda’s Maxis raise around $2 billion at a time when global credit scenario is not very positive.

At the same time, India’s telecom growth story continues to attract international investor interest, with all the major telcos making a beeline for India. This is despite the presence of 12 players and entry of four more telcos later this year. For Ananda, stake sale could be an opportunity to raise money without giving any controlling rights.

Low-profile billionaire Ananda Krishnan, whose business empire stretches from telecom and media to power and construction, is known for buying and selling businesses. In May last year, he sold Excel, the giant exhibition venue in London’s Docklands, for around $230 million, to a group backed by the crown prince of Abu Dhabi. He then bought a 20% stake in British regional newspaper chain Johnston Press and is widely believed to be interested in setting up a global media empire.

“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.

Huawei may bid for majority stake in ITI

Thomas K Thomas on The Hindu Business Line

New Delhi, June 8 Chinese telecom vendor Huawei may be one of the interested bidders for picking up stake in the factories owned by State-run Indian Telephone Industries Ltd. Huawei told Business Line that it was open to discussing opportunities for strengthening relationship with the Indian manufacturing company for whom the Department of Telecom will invite bids from strategic partners.

When contacted, a Huawei India spokesperson did not rule out the possibility of acquiring ITI. “Huawei India already has a strong and successful tie-up with ITI for transmission network for the Indian market, and is open to further discussion for more collaboration with business partners and governments in developing the local telecom industry, including local manufacturing in India. The specific plan is yet to be finalised by our parent company,” the spokesperson said.

Alcatel Lucent could be the other interested party, but the company is yet to confirm their plans.

Both Huawei and Alcatel Lucent has had a strategic partnership in the past for supplying mobile equipment to BSNL. Both these companies are also strong in the WiMax and IP-based telecom equipment market for which ITI’s existing factories can be used. However, if Huawei does bid for a stake in ITI’s factories it may have to deal with the security concerns raised against Chinese vendors by the Intelligence Bureau.

3 SPVs planned

 The Government is proposing to set up three special purpose vehicle companies for divesting stake in three of the six manufacturing plants owned by ITI. The three plants are located in Rae Bareli, Nainital and Bangalore and is involved in producing WiMax modems and optical transmission equipment. DoT plans to invite private players to pick up majority stake in the range of 51 per cent to 74 per cent in each of the three SPVs.

To start off the process, DoT on Monday invited expression of interest from global consultants to act as advisors to the Government. The consultant will be finalised by end of June.

Related stories at

• http://www.thehindubusinessline.com/2009/06/09/stories/2009060951130400.htm

RComm, Kribhco JV eyes rural cell market

From Hindustan Times on June 9, 2009

Kribhco and Reliance Communications Ltd (RComm) on Tuesday formed a joint venture — KRIBHCO Reliance Kisan Limited (KRKL) — to distribute RComm’s services through its network of more than 25,000 cooperatives throughout the country.

KRIBHCO will hold 60 per cent equity in the joint venture company with the balance 40 per cent held by Reliance ADAG group.

“The JV will market telecom products of RComm — both GSM and CDMA,” said SP Shukla, president, wireless, Reliance Communications.

“Later, KRKL will also distribute products and services of other business enterprises of Reliance ADAG including Reliance Capital, Reliance Entertainment and BIG TV DTH,” he said.

This is the second such marketing tie up to reach out to the rural area. Earlier, Bharti airtel did a similar tie up with IFFCO.

Related stories at

• http://www.business-standard.com/india/news/rcom-kribhco-to-form-jv/360632/
• http://www.thehindubusinessline.com/2009/06/11/stories/2009061150960400.htm
• http://economictimes.indiatimes.com/RCOM-ties-up-with-Krishak-Bharati-to-capture-rural-India/articleshow/4640234.cms

Emerging markets to steer global growth, says Sunil Joshi

On India Telecom News on June 9, 2009

Sunil Joshi, president of Tata Communications’ enterprise business for emerging markets, speaking at NetEvents 2009 Asia-Pacific Press Summit in Singapore said that his strategy is heavily focused on emerging markets. “And we would like to consider ourselves as emerging market specialists.”

We looked at the world and the emerging markets and we identified about 60 countries that had the potential, around the world, to look at for our engagement. We filtered it through the same mechanism, down to a list of 30 that are of priority for us. Of those 30, in the last year and a bit, we have gained presence or access to 24 out of the 30 and we’re well on progress of getting to the other six that we have outlined. But what does help us is a very structured way of engaging in emerging markets. The key thing for emerging markets is understanding local knowledge and having people on the ground. So whether it is investments in South Africa or it’s in India or it’s China, or Middle East, it’s about having [people] on the ground who actually understand the nuances of the market.

Our commitment to emerging markets — and please, this is not a communications sell, this is our intent to share with you how we have looked at the world and the emerging markets, those that we have chosen to apply our focus and our investments in. We announced a year ago our JV with China Intercom. And we’re well on the path of executing that as the processes go through.

We are building cable systems into Asia, which is up and running, which connects Singapore through Japan and connects Hong Kong, Vietnam and the Philippines on its way through our partners. Pipe will connect Guam to Sydney and also be able to connect onto the West Coast of the U.S. We have the Eurasia cable, the [IMAWE] cable, which will connect Mumbai through Middle East into Europe, and therefore into the Atlantic belt, thereby providing capability for emerging markets to be connected to various other emerging markets and mature markets. The Sub-Saharan Africa, the investment NeoTel, where we have 56% equity stake and thereby being able to participate in the growth of South Africa, as a strong geography for engagement. And the [Seacon] cable that connects Mumbai into South Africa, with various connections towards the east coast of Africa, thereby enabling us to help enterprises, businesses grow into geographies, but equally important, making investments in those geographies to grow the local economies as well.

This is just a simple example of the various cable systems that connect the world. Our business is all about connecting people and businesses, to be able to communicate. And if we are able to do that with the core infrastructure that we have built globally, and execute upon our emerging markets strategy and our vision, we’ll be doing okay.

Establishing [pops], which is our own capability in these emerging markets is important. Many of these emerging markets, we’ve established our own presence. However, there are some that we haven’t. And we then reach out to partners. So therefore, the ability to be flexible and have partnership arrangements with other telecommunications organisations to make it seamless for our customers to be able to get access to various geographies around the world and help them grow.

Newbusiness models.

Have people in the audience heard and experienced telepresence? Yes, some have? It’s obviously the next paradigm of collaboration. And telepresence in its conventional model, as it taught, could be procured and applied within your own enterprise and within the enterprise, it’s a closed group. However, we were the first service provider in the world to launch public rooms. Public rooms means you can go in and rent a telepresence room by the hour, which allows you not to have the necessity to buy, but to leverage the experience and the value of a telepresence for collaboration around the world. Obviously we’re building more rooms as we go. And then, at some point, when you’re ready, you can choose to, by yourself or continue to leverage a technology that will enable you to collaborate across the world without having the need to travel.

The next step of our telepresence journey is a global meeting exchange, which then connects various telecommunications companies together, regardless of telepresence on another service provider’s network, telepresence on our network, and for them to be able to talk, thereby protecting your investment and creating new business models to help customers grow in the geographies without having the necessary for a huge investment.

So in conclusion, the strong execution is really key for emerging markets. And we think that strong partnerships are really important, to be able to enter and gain entry into some of the markets that we’re not fully conversant with. The business model innovation becomes important. Many organisations out of the emerging markets have created paradigm shifts on how business models were previously construed, created not the need for a heavy capital-intensive investment, but maybe operationalising the investment, creating a pay-as-you-go model. And those are not normal models.

Business intelligence, of course information is key. Being able to assimilate the information regarding markets that you’re not familiar with, having partners that can give you that information, but also making the best out of the information you get. And obviously, leveraging research and consulting capability and the global infrastructure.

Our strategy is heavily focused on emerging markets. And we would like to consider ourselves as emerging market specialists. But more so, we’d like to have our customers consider us as emerging market specialists, as we have entered and most of our investments are being made into connecting and making sure that the emerging markets are connected to the rest of the world. So having points of presence or having investments in entities in the form of JVs or in terms of equity participation has enabled us to broaden our footprint and really give proof points to the market that this is a crucial area for growth, not just for us, but for almost every business that we’re looking at.

SSTL hopes to break even in 3 years: Dy CEO

4 Jun 2009, 0006 hrs IST, Rashmi Pratap, ET Bureau

MUMBAI: Telecom company Sistema Shyam Teleservices, which is launching CDMA-based mobile services across the country, hopes to be able to pay for all its operating expenses within three years despite intense competition from a dozen other players in the market.

The joint venture between Russia’s Sistema and India’s Shyam Group is expecting to start generating enough money to be left with cash in hand after servicing debt by FY 2013.

Sistema-Shyam’s guidance on profits is interesting because analysts tracking the sector believe new players may not be financially strong and could be prime targets for acquisition. Deputy CEO T Narasimhan said Sistema Shyam will be able to break even by FY12 as there was still a lot of potential left in the India growth story.

“India is a huge market and remains under-penetrated. The cellular growth story is still unfolding and we have already roped in one million users,” he said. Sistema Shyam operates in Rajasthan, Kerala, Tamil Nadu and Kolkata, with spectrum for a pan-India operation. Both telecom operators and investors are bullish on the Indian market that has 400 million users in a population of 1.15 billion. New entrants like Loop Telecom, Datacom Solutions and Unitech-Telenor are expected to soon roll out their services.

According to UBS analyst Suresh A Mahadevan, new operators face challenges of brand building, distribution, organisation building, negative free cash flow, and scale. “We conclude it will take four to five years for EBITDA to break even and seven to eight years for net profit to break even,” he stated in a recent report on the sector.

Sistema Shyam CFO Sergey Savchenko said it is too early for the company to give any revenue targets as it is still rolling out operations and building scale.

“However, we do not see any difficulty in terms of finances. We hope to turn free cash flow positive in four years from now,” he said. He said this was possible because the company could reach the market in a very short time by sharing passive infrastructure.

“It takes time to set up your own towers. We have instead tied up with various operators for sharing passive infrastructure across India,” Savchenko said.

The company’s overall investment of $5.5 billion includes operating expenses like rentals for towers also. “Not all of it is capex. It has our opex too,” he added.

“Our tower portfolio will have 20% of our own towers while the rest will be in tie-up with other operators. This increases operating expenditure but reduces the roll-out time, and it is a huge saving,” he said. He ruled out any changes in the company’s shareholding in the near future. Recently, the Russian government bought a stake from Sistema in the company. Currently, Sistema has 73.7% share, Shyam group 23.8% and the public 2.5% in the company.

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

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

NEW DELHI: A potential merger

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

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

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

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

SingTel to keep stake in Bharti Airtel intact

Gairola, Hindustan Times , 03 June 2009

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

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

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

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

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

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

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

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

Raja puts BSNL-MTNL merger on back-burner; BSNL may be listed

1 Jun 2009, 1939 hrs IST, PTI on http://www.economictimes.com

NEW DELHI: Telecom Minister A Raja on Monday virtually ruled out the BSNL-MTNL merger saying it is difficult due to lack of identical factor between them. “Identical factors are not there legally for BSNL-MTNL merger,” Raja said.

The Minister, who assumed charge today, however, said the Department was keen on listing of BSNL and advised PSU management to start talks with the Employees Union for taking the company public. The union has been opposing the listing.

Late Communication Minister Pramod Mahajan had proposed the merger and was revived by Raja’s predecessor Dayanidhi Maran for synergy purpose. Government holds 56.25 per cent in MTNL and it is listed in NYSE and in India. BSNL is 100 per cent owned by government.

MTNL provides telecom services in Delhi and Mumbai, while BSNL serves the rest of India.

On plans to list BSNL in the bourses, Raja said the management has been advised to initiate talks with the employees union.

“We want to list BSNL… We want to create a consensus for it. We have asked the BSNL management to talk to the union”, said the Minister. Estimates suggest that BSNL is worth 100 billion dollars and dilution of 10 per cent stake would help the company raise 10 billion dollars (about Rs 48,000 crore).

Story in The Hindu Business Line on 02 June 2009

Decision on BSNL listing after talks with unions

New Delhi, June 1 The Communications and IT Minister, Mr A Raja, on Monday said that decision related to listing of Bharat Sanchar Nigam Ltd will be taken after discussing it with the company’s employee unions.

While BSNL had approached the Government seeking permission to go for an initial public offering, the employee unions had objected to it. The PSU is planning to offload about 10 per cent stake to the public. “We have to build a consensus around it,” Mr Raja said.

Mr Raja also ruled out the possibility of merging the two PSUs – BSNL and MTNL.

On the issue of auctioning spectrum for 3G services, the Minister said that he will seek approval from the Cabinet Committee on Economic Affairs.

The previous Government had referred the matter to a Group of Ministers but since some members of this GoM is not in the new Cabinet, the policy for 3G could be reverted back to the CCEA.

“We need to be clear on whether to get the approval from the CCEA or for a new GoM,” Mr Raja said.

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.

RCOM joins the QIP queue

30 May 2009, 0136 hrs IST, ET Bureau

MUMBAI: Reliance Communications (RCOM) has joined the list of companies planning to raise funds through the Qualified Institutional Placement (QIP) route.

The country’s second-largest mobile service provider said on Friday that it will seek shareholder approval to garner funds from qualified institutional investors.either through a share sale or an issue of a variety of instruments including fully convertible, partly convertible or non-convertible debentures with warrants or any other security, it said in a statement to the stock exchanges. Although the company did not say how much it planned to raise sources close to the development said it may be around $500 million.

RCOM said the funds will be raised in one or more tranches. The proposed exercise shall not result in increase in the company’s paid-up capital by more than 25%, it said. RCOM said the funds may be utilised to finance the company’s plans to participate in the upcoming auction of frequency spectrum for 3G and Wi-Max services. A banking source said Reliance Infrastructure, another firm which is part of the Anil Dhirubhai Ambani Group (ADAG), may also opt for a similar exercise. A spokesperson for the group, however, denied any QIPs by RCOM and R-Infra when ET had sent him a query on last Friday.