At last the Finance Ministry is listening to Telecom operators woes. It is reliably learnt that Telecom will be treated at par with core infrastucture like Power and Roads in the upcoming budget on Feb-28th. The significance of this will be Telecos will get a 10 year 100% tax exemption which will enable them to upgrade and invest in remote areas. The government is already being compensated for loss of revenuse by means of service taxes from consumers. Zero tax for Telcos/Cellcos means more investments in next generation technologies. Get ready to watch the next cricket match on your cell phone – true convergence atlast.
Bharti Televentures’ business model was applauded by IBM CEO Sam Palmisano during IBM business leadership forum in China where top CEOs from the western world participated. In Feb-2004, Sunil Mittal, CEO of Bharti took a bold step in outsourcing its cellular network operations to its equipment vendors – Nokia, Ericsson and Siemens. Sunil’s views were he could focus more on better customer service. This rocked the IBM forum as this was a bold and unique move by any large telco/cellco in the world.
After 2 years, Hutchinson-Essar a joint venture between Hutchinson Whampoa and Essar group is following similar model by outsourcing their network operations to Nokia. As C.K.Prahlad predicted that their is a lot for the Western CEOs to learn from the East, this proven business model is something which AT&T – Cingular and Sprint can’t afford to miss who are known for their poor customer service.
Warburg Pincus one of the most successfull VCs that backed Bharti Telcom since the beginning was consistently selling its stake and completely exited with it’s last 4.4% stakesale to Vodafone in Q4-2005. Now it is reliably learnt that SingTel has hired a merchant banker to value its whopping 31% stake in Bharti Televentures.
Vodafone doesn’t really invest for financial gains. It holds 45% in American telco, Verizon and has a substantial say in the company. If Vodafone has ambitions in India, then SingTel could unload its 31% stake in favor of Vodafone making it the second largest shareholder after Mittal family who still hold 46% in Bharti. SingTel’s total investment in Bharti is around $650 million which is now valued at $4.5 Billion.
However, it is not very clear on why SingTel wants to exit India. At one point(2003 and 04) it had lobbied in Delhi to raise the FDI cap in telecom.
A major TV channel reported that Bharti Televenture had accumulated losses of Rs2200 crores which were hidden by intelligent accounting practices. PTI release says Bharti executives have confirmed that their was nothing wrong in their acounting procedures and have even got Vodafone to back their statement(Vodafone, in October – 2005 bought 10% stake in Bharti Telecom from Mittal’s family at Rs6700 crores).
Their is no smoke without fire. Unfortunately, I can’t read corporate accounts. If any of you can understand Indian accounting procedures and laws, then you might want to enlighten us.
The pre-diwali subscription addition is showing no signs of slow down. Most of the additions were in the Cellular category with Wireless in Local Loop(WLL – something very popular in the Indian Convergence story) securing second place ahead of Land lines. 37.9 lakh new connections were added for month ending Novermber compared to 32.4 lakhs and 28.5 lakhs in October and September respectively. The total tally is skewed towards cell phone subscribes, with 7.1 Crores and land line subscribers at 4.9 crores. The tele-density is now at 11% and operatrors expect more growth as they move interior to remote towns and villages. DOT has set an ambitious yet achievable target of 25 crore subscribers by the end of 2007.
To achieve this growth, Indian convergence service providers must scale up their infrastructure investments as well. They have spent Rs50,000 crores in 2004 and Rs57,000 crores in 2005 and are expected to spend Rs70,000 crores in 2006. This explains why CISCO and Intel are not only investing agressively in Indian centers but are also buying smaller Indian firms in the digital convergence arena. Is the convergence market shifting to the east ?