Archive for the 'Telecom' Category

MTNL may win race for Lanka’s Suntel

MTNL may win race for Lanka’s Suntel

Beats Telekom Malaysia with $160- 180m Bid

STATE-owned Mahanagar Telephone Nigam Ltd (MTNL) is believed to have emerged as the highest bidder for Sri Lankan fixed line operator Suntel. According to sources dose to the development, MTNL is learnt to have bid between $ 160 million and $ 180 million for the Colombo-based telephone company.

The Sri Lankan Rs 3.31-billion Suntel will give MTNL a foothold in the island country’s fast-growing telecom market. It will also be the first overseas acquisition by the NYSE-listed MTNL, which had earlier tried unsuccessfully to enter the Saudi Arabian and Kenyan telecom markets.

A formal announcement on the Suntel deal is expected to be made by mid-June, said sources. When contacted, MTNL chairman R S P Sinha refused to comment.

Other companies in the race for Suntel include Telekom Malaysia and Sri Lankan firm John Keelis Holdings. Sri Lanka, with a fixed-line tele-density of around 10% remains a lucrative market for Indian operators who are expected to face saturation in the domestic market in four to five years.

Suntel is the main competitor to Sri Lanka Telecom. While Suntel’s latest results are not available, its net profit for the six months ended June 30, 2006 fell to Lankan Rs 290 million, while revenues doubled to Lanka Rs 3.31 billion. “The growth in net profit for the year ending December 2006, is expected to reach up to 46 %,” Suntel had said an earlier forecast.

Indian operators are keen on the Sri Lankan market. Although the Tatas-owned VSNL has won international long distance and ISP Licenses in Sri Lanka, Suntel was not on VSNL’s radar as the Sri Lankan operator offers CDMA fixed line services, which is not a strategic fit for VSNL.

Bharti Airtel also recently announced an investment of $ 150 million to roll out GSM and W-CDMA services in the island nation.

Suntel’s largest shareholder is Nordic telecom firm Telia AB, which holds a 55 % stake through its holding company Overseas Telecom AB. The remaining shares are held by Sri Lanka’s Metro corp, the National Development Bank of Sri Lanka, Townsend Ltd of Hong Kong and the International Finance Corporation (IfC).

Earlier, only Telia was learnt to have been interested in selling the stake. However, subsequently, other partners have also agreed to exit Suntel. Suntel plans to invest $33m in 2007 to expand networks.

If the deal with Suntel materialises, it will provide a respite to MTNL, which has been under immense pressure to grow abroad as its business remains restricted to Delhi and Mumbai.

MTNL lost the race for Saudi Arabia’s third mobile licence in March and fixed line license in April. It was also out of the race for license in Kenya. It has the licence to offer fixed line, cellular and ILD licences in Mauritius.

Lehman, Spinnaker pick up stake in Spice

Lehman, Spinnaker pick up stake in Spice

Deal Part of Spice’s Pre-IPO Placement

A CLUTCH of investors led by Lehman Brothers and Spinnaker Investments are learnt to have picked up a small stake in Spice Telecom for about $30 million, as part of the pre-IPO placements by the cellular service provider. It is estimated that these investors will pick up a fifth of the nearly 138 million shares that will issued in the IPO at about Rs 45 per share. However, the exact figure will be known only after Spice Telecom sets its price band during its broad meeting, which is slated to be held early this week. Importantly, this also implies that any talks of merger or acquisition with Idea Cellular will continue only after Spice’s IPO as reported by ET earlier. A possible reason for this is that the listing will ensure a robust price discovery process for the company, which is currently believed to be valued at about $ 1 billion. Besides, any merger post-IPO will also ensure a cashless swap of equity.

According to sources close to the development, this will be the only pre-IPO placement that will be made by Spice Telecom. Sources also added that the company was targeting an issue date of June 18. Investment banker Lazard is one of the advisors to Spice Telecom for its upcoming IPO.

Last month. Spice Telecom had got the stock market regulator Securities and Exchange Board of India’s {Sebi) nod for its Rs 600 crore IPO. However, last week Sebi had raised some observations on the Spice’s draft prospectus, which in turn led to the company to withdraw its offer document. Spice sources told ET that these “were just formal observations, while adding the company would file a revised prospect us by Wednesday (June 6), and was targeting the third week of June for the float of its shares”.

Spice will be offloading nearly 138 million shares, equivalent to 20% of its enlarged capital base. Following the IPO, the stakes of the Modis and Telekom Malaysia, which is currently at 51 % and 49%, will fall by 10% each. This implies, post-IPO, the Modis will have about 41 % while Telekom Malaysia 39%. Spice currently has 2.8 million subscribers and has operations in two telecom circles—Karnataka and Punjab.

While the company is yet to finalize the pricing details of its shares, it will have to sell them at Rs 45.80 each to meet its target of raising Rs 600 crore

Takeover or A Marriage: Idea & Spice yet to decide

Takeover or A Marriage: Idea & Spice yet to decide

Birlas Want To Acquire Spice, Modis Think Merger Is A Better Idea

MERGER or acquisition? This is the billion-dollar question around which hinges the deal between Idea Cellular and Spice Telecom. The two companies, along with Telekom Malaysia (TM) that holds 49% stake in Spice, are yet to work out an amicable arrangement. While Idea, in which the Birlas own 57% stake, wants to fully acquire Spice, the Modis-promoted company is keen for a merger, sources told ET.

“From a market perspective, a marriage of the two is a perfect fit. But who’s a long-term player is not yet clear,” sources close to the development said. Spice has 2.8 million subscribers, largely high-end, in Punjab and Kamataka circles where Idea is not yet present.

Idea, which listed on the bourses in March this year, has grown through the organic as well as the inorganic route in the past. “They clearly want to acquire Spice. However, the Modis would prefer a merger,” said sources.

“As of now, it looks as if it is veering towards an all-stock buy-out by Idea, with the shareholders of Spice holding a minority share in Idea,” said sources, adding that it has not yet been finalized.

While an acquisition of Spice will give Idea a ready entry into two new circles and a good user base, the Birlas are not willing to pay over the top. Spice is said to be quoting a price of more than a billion dollars for the two-circle operation, to which the Birlas are not agreeing.

“We are a fast-growing company and our valuation is definitely higher than a billion dollar”, a Spice executive said. However, going by the fact that promoters of Spice will offload 20% stake in the forthcoming IPO for $ 150 million, the company’s valuation is $750 million. This remains a bone of contention between the two sides.

Idea, which listed on the bourses in March this year, has grown through the organic as well as the inorganic route in the past. “They clearly want to acquire Spice. However, the Modis are looking at a merger,” said sources, adding that Idea will continue to be an AV Birla group company going forward and there was no question of the company diluting its identity in a merger.

Also, a buy-out of Idea by Spice seems unlikely because Idea is seven times bigger than Spice. AV Birla group officials have earlier said the group will not dilute its stake in Idea below 51%. Idea scrip moved up 2.6% during the day to close at Rs 126.10.

Idea Cellular MD Sanjeev Aga refused to comment.

Mr. BK Modi also said he could not comment on the matter.
Meanwhile, TM has clearly said that it will not exit the Indian market, TM bought 49% stake in Spice in March last year for $ 179 million. “We are committed to Spice and once spectrum is available for other circles, we will expand. We also understand that consolidation is inevitable in India and if it works for us, we are open to looking at it,” a top TM official told ET.

“However, for us, it is not about an exit situation. We’d like to play a partnering role with Idea Cellular. We are not going to exit,” the TM official said. Spice applied for spectrum in 20 circles in September last year. It has already received the DoT nod for NLD and ILD operations.

It is too early for the deal to come through as Spice was working on its IPO ahead of any agreement. Sebi has given its approval to the public offering. “We should be opening in the end of June. Merger is not what we are working at right now,” a senior Spice official said.

However, an acquisition after the listing of Spice will become more complicated due to regulatory issues.

For the year 2006, Spice recorded revenue of Rs 533.78 crore and EBITDA of Rs 107.86 crore.

MTNL to set up IT Park in Noida

MTNL to set up IT Park in Noida

STATE-OWNED MTNL, which offers telecom services in Mumbai and Delhi, is diversifying its businesses to venture into developing IT parks. The company, which has prime property in both metros will build IT parks and lease this infrastructure to software, BPO and KPO companies.

MTNL has also dropped plans to hive off its land bank into a separate company.
Its first project, which is slated to kick off soon, will see the PSU build a 80,000 sq ft IT park in its land in Noida — Core Knowledge Park (CKP). The company has also informed the Bombay Stock Exchange that the Board of Directors has approved the development of its Noida property.

“This will be developed by a consortium selected by the company against an open Expression of Interest (EOI) floated by the company,” the PSU said in its filing with the BSE . MTNL sources said that the company expected returns from the CKP in terms of rentals from December 2008, while adding that the developers for the project have already been short listed. While industry sources said that MTNL had awarded the contract to develop the CKP to two consortiums—Shanghai Urban Construction Group and IDEB—this could not be independently verified by ET. Interestingly, MTNL’s CKP project is coming up at Noida’s sector 62, where other developers such as DLF and Unitech are also building IT parks.

MTNL is likely to adopt a model where the developers of the project will not got a stake, but will instead be provided with a revenue sharing arrangement. This implies, both MTNL and the developers will share the rentals on the property—the company is currently working out the time frame and the ratio of revenue sharing, sources said.

At the same time, MTNL is also in the process of identifying developers for developing its land banks in both Delhi and Mumbai. In its next project, it is likely to develop its 1 lakh sq ft plus property in Mumbai, sources added. MTNL has been looking at extending its business overseas in addition to venturing into new avenues at home as it has been under intense pressure from the ever increasing competition in Delhi and Mumbai markets. Additionally, the company’s revenue streams from telecom services are limited as these metro markets are facing saturation and is also witnessing a fall in landline connections.

BSNL offers iron-life cover to all customers

BSNL offers iron-life cover to all customers

Operator Mulls Foraying Into Life Insurance

PLANNING to surrender your BSNL landline connection? Here is one reason why you should keep your fixed line or take up BSNL’s mobile service: the PSU is planning to provide free non-life insurance cover to all its customers. A top company source told ET that BSNL is planning to provide a cover of Rs 50,000 to each of its 78-million landline and mobile subscribers, in case they were to suffer any mishap or accident.

In the next phase, the operator is mulling the possibility of a full-fledged foray into life insurance sector in partnership with an insurance player.

The PSU is confident that free insurance cover, where it will bear the premium, in addition to stopping the surrender of land-lines, will also be a major boost to expand its cellular subscriber base.

The plan is in a preliminary stage. We’re yet to formulate a road map and a timeframe for offering this service. While free insurance will cost BSNL a good amount of money, it will bring in value-addition to the services we provide our customers,” a top BSNL executive said.
The executive also didn’t rule out the possibility of a full-fledged insurance foray, in partnership with an insurance player. “If this plan takes off, then we would look at providing a life insurance policy to our subscribers, It will be possible for us since we know our customer profile and history. The revenues from pure telecom services are declining and voice services won’t be very profitable in the future,” the BSNL executive added.

Industry analysts estimate that BSNL will have to shell out a premium of between Rs 100 to Rs 200 per subscriber annually to offer them an insurance cover of Rs 50,000. Providing the service to its 78-million existing users would mean an annual bill of Rs 780-1,560 crore for BSNL. The PSU’s net profit in 2006-07 was a little over Rs 10,000 crore.

Currently, BSNL has a corporate group life insurance policy from the Life Insurance Corporation (LEC) for its over 3.5 lakh employees for a sum assured of Rs 4,770 crore. Under this scheme, over 10,000 senior BSNL executives are insured for a sum of Rs 5 lakh for a monthly premium of Rs 500, about 40,000 officers are covered for a sum of Rs 3 lakh and three lakh non-executive employees get a life insurance cover of Rs l lakh each.

The public sector communications company currently has just under 28 million mobile subscribers and about 50 million landline users. It is also in the process of finalising orders for 45.5 million GSM lines with Ericsson and Nokia, in addition to another 18 million lines from State-owned ITI. Industry analysts estimate that at the current pace of growth, BSNL will have about 100 million subscribers (both landline and fixed) within by mid-2008. Even if a mere 10% of the PSU’s subscriber base were to opt for an insurance policy, BSNL will have about 10 million insurance customers.

Private Telcos such as Bharti Airtel, Reliance Communications and Tata Tele-services already offer life insurance services through insurance arms of their parent companies.

Dell sets up unit for govt, education buyers

Dell sets up unit for govt, education buyers

PC Maker Creates Specialised Product Portfolio for the $500-M Market Growing 50% A Year

PC maker Dell India has set up a new dedicated division and created a specialised product portfolio to tap the $500-million government and education market in the country
“We have formed a new vertical — government and education— to win businesses in the government, public sector enterprises and higher education space. We have also readied the product portfolio, including a full range of laptops and notebooks, X86 servers and projectors. Our Chennai plant, which is on track, would further add to our competitiveness in catering to this market,” said Dell India country head Rajan Anandan.

The government and education market is growing at a CAGR of 50%. According to industry estimates, government and public sector enterprises would account for 20% share of the domestic PC market.

“There is greater IT implementation in PSUs now, the defence IT expenditure is also rising and with the e-governance initiatives taking shape across the country, we see great opportunity in the market,” added Mr. Anandan.

Dell has started providing its products including PCs and servers to the Indian Railways, the Tamil Nadu government undertaking, Elcot and Union Bank of India, it is now looking at enhancing presence in the market and tying up with national and regional system integrators for installation.

The Rs 2,000-crore Dell India witnessed a growth in revenues of over 50% and volume growth of 70%in2006. “While large IT/ITeS companies will continue to provide the largest chunk to our revenues, we have been steadily expanding into other areas. Two quarters ago, we entered the home and small business space. The government and education space is the next opportunity,” said Mr. Anandan.

Dell recently inaugurated its R&D centre in Bangalore, its largest outside its main Austin facility, and a centre of excellence for Dell’s enterprise solutions and products.

According to IDC figures, the domestic IT market docked revenues of Rs 61,761 crore in 2006 and is expected to touch Rs 116177 crore by 2010.

Nine giants in race for 26% in RCOM’s tower biz

Nine giants in race for 26% in RCOM’s tower biz

Tower Vision, American Towers, Apax Partners, Carlyle, Temasek, George Soros, Blueridge & Tiger in Race

AS MANY as nine investors are currently in talks with Reliance Communications (RCOM), the country’s    second-largest    wireless    service provider, for picking up a minority stake in its telecom infrastructure business. RCOM is currently in the process of spinning off its telecom infrastructure into a separate company — Reliance Telecom Infrastructure Limited (RTTL).
According to RCOM sources, the companies that are currently engaged in carrying out due diligence of RTIL include global tower infrastructure majors—Tower Vision and American Towers, private equity investors—Apax Partners; Carlyle; and Temasek, the private equity arms of HSBC and Deustche Bank, and financial investors—George Soros, Blueridge and US-based Tiger. The company is looking to divest up to 26% stake in RTIL to strategic investors and has been in negotiations with many investors over the last 2-3 months. Sources in the industry say the deal could be in the range of $ 1 billion for a minority 26% stake in the telecom major’s tower business, pegging the valuation of the tower company at $4 billion. Reliance Communications currently owns over 14,000 towers, and is in the process of adding another 20,000 this fiscal.

ET has also learnt that JP Morgan is the advisor to RCOM. The preliminary bids from these nine players are expected by June 7 and the stake sale is expected to be completed by June 30, sources added.

ET had first reported last week that US private equity giant Carlyle and American Towers had formed a partnership to buy and own tower companies in India, while adding that the duo would also be bidding for a minority stake in Reliance Communications’ tower business.

The potential for standalone tower business in India can be gauged from the fact that
the country will need about 3,50,000 telecom towers by 2010 compared to about 1,11,000 at present, as per estimates made by the Telecom Regulatory Authority of India, the telecom watchdog.

India currently has 171.46 million mobile users. The Centre for Telecoms Research (CTR), London, recently predicted that the country’s mobile phone user base will grow to 600 million by 2011 — an astounding three-and-half fold growth in the next four years. With infrastructure creation being the primary driving force that will sustain growth in the world’s fastest growing cellular market, standalone tower companies have huge opportunities ahead of them.

Apart from Reliance Communications, other telcos such as Bharti Airtel and Idea Cellular are all in the process of hiving off their towers. While Bharti Airtel has said that this would create operational efficiency, RCOM hopes to reduce its capex requirements and leverage the parent company’s balance sheet, as it would be run by independent financing.

Internationally, tower management companies have been highly successful. Globally, this is an emerging business model with cell cites and other related infrastructure being owned by third parties, who lease them out to multiple service providers.

RCOM rings in sub-2k FM phones, Tatas too join party

RCOM rings in sub-2k FM phones, Tatas too join party

Third Low-Cost Phone Launch within a Month for Reliance Communications

IN MANY ways, FM marked the return of the radio. Now, the market for cell phones with FM is hotting up and every player in the segment is reaching out to grab a sizeable portion of the cake. Two major players in the CDMA segment, Reliance Communications and Tata Indicom, on Monday made announcements on phones with FM.

“As many as 6 million mobile phones are sold in India every month. About 25-30% of these are FM-enabled. We are looking at a sizeable portion of this segment,” Reliance Communications president (personal business) SP Shukla told reporters over a video conference on Monday. In its third handset launch within a month, Reliance has launched two FM-enabled sets — Classic 261 and Classic 761. “Classic 261 has been priced at Rs 1,888 while Classic 761 will come at Rs 1,919,” he said.

Coinciding with RCOM’s launch, Tata Indicom repriced its model Tata Indicom Rythm with FM at Rs 1,299 as part of a bundled offer announced on Monday. Tata Indicom Rythm was launched for Rs 1,799 a few months ago. The basic offer, that was announced by Tata Indicom, bundles the handset — Haier D1600 with a colour display and FM—at Rs 1,099.

Tata Indicom on Monday claimed to have broken the price barrier once again, with its most affordable bundle offer in the country at Rs 1,099. Under this offer, along with the handset, customers get a free connection worth Rs 499 offering free incoming facility for a year, 1,500 minutes of free Tata-to-Tata calls.

Reliance’s Mr. Shukla pointed out that his company scored over competition on three points. “We are not competing on price alone. We have many more features and are well prepared. Our handsets are packed with features that are more than those being offered by any other mobile in the market today at similar price points. Second, we are a national operator, and third, we have a chain of after-sales service centres across the country,” he said.

“The backing of Reliance is there in our phones. Plus, we bring economies of scale on large volumes,” he added. Mr. Shukla said he was confident of the company growing its market share. RCOM now has over 30 million subscribers and is the second largest operator after Bharti Airtel.
The company seems to readying itself to take on Vodafone’s low-cost handsets, which the British giant is planning to introduce in India later this year.

Vodafone, which acquired Hutchison Essar last month, has announced it will roll out low-cost handsets priced at $25and $40, targeted at emerging markets such as India. While the operator is expected to provide some subsidy when it brings the handsets to India, the amount is not yet known. At current prices, Vodafone may sell its low-cost phones at around Rs 1,000 and Rs 1,600 respectively. Nokia’s lowest priced monochrome handsets come at Rs 1,699 currently.

Early last month, RCOM said it had sold 1 million low-cost handsets, priced at Rs 777, Rs 884 and Rs 888 within a week of their launch. Subsequently, RCOM rolled out colour phones beginning at Rs 1.234. The colour phones entered the market on May 18 and over half-a-million units were sold by the end of the month, Mr. Shukla pointed out.

“Our Classic range of phones have been extremely well-received by customers. With FM channels now available in all major cities in the country, our FM radio phones will provide not just mobile connectivity but also portable entertainment at very affordable prices,” he added.

The two models launched are SIM-based and customers can opt for any plan.

Mr. Shukla feels that its launch of FM enabled sets will convert GSM customers in favour of them. “These customers generally have higher ARPU. We will offer them higher value addition when they convert,” said Mr. Shukla.

“For mobile operators, music related value added services offer the highest revenue in the segment. These includes facilities like ring tones, caller ring tones,” he added.

Telecom equipment market grosses Rs 75,000 cr. Report

Telecom equipment market grosses Rs 75,000 cr. Report

NEW DELHI: India’s telecom equipment sector has posted revenue of Rs 77,170 crore in 2006-07, at a growth rate of 43.5%, according to a report. The main drivers of this growth include massive expansion initiatives announced by service providers and increase in consumer demand on the back of crashing tariffs and handset prices, according to a report by communications magazine Voice and Data. Nokia retained the top position among telecom equipment companies in 2006-07 while Ericsson jumped to second position from fifth position in 2005-06. The handset segment, including mobile and fixed line, reported the highest growth at 45 %followed by carrier equipment and enterprise equipment at 44% and 38% respectively.

FLAG Telecom forms alliance with global co.

FLAG Telecom forms alliance with global co.

Deal To Give It Access to 6 Continents

FLAG Telecom, the undersea cable arm of Reliance Communications, has entered into an alliance with a global submarine cable operator which will enable it to enhance the reach of network to both South America and Australia. The company, however, refused to divulge the name of the operator, while confirming that the agreement was signed in London last week. The alliance will give Flag Telecom access to over 2,00,000 km of fully IP-enabled optic fibre of multiple undersea cable owners, long distance and access providers across six continents on routes where it does not have a presence.

The company said that the deal will not only give it additional routes to carry traffic for its existing and potential customers, but also increase the utilization of its existing network considerably. The move would enable Flag to cater to 1,250 plus Indian and global enterprise, ISP and Carrier customers for connecting to Australia and the fast developing countries in Latin America, the company added.

At present, the Flag network connects the US, Europe, Middle East, Mediterranean, Indian Sub-continent and Par East. Last year, the company had announced that it would invest Rs 7,000 crore to build four new undersea links — the first connecting India, Malaysia, Singapore, Indonesia, Vietnam, Philippines, Brunei and Hong Kong while the second cable will cover African and Mauritius. The third leg is likely to cover Greece, Cyprus, Turkey, Malta, Libya and Lebanon while the fourth would cover the trans-Pacific route US west coast, Japan, China and Hong Kong. Flag has already short listed four global submarine cable infrastructure majors NEC and Fujitso from Japan, USA’s Tyco Networks and France’s Alcatel to build these cables.

Flag Telecom is also slated to be listed on the London Stock Exchange soon and RCOM hopes to raise over $500 million by diluting up to 24% stake in the company.

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