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.
Earlier I reported that Maxis Telecom promoted by Malaysian billionaire Anand Krishnan had bought a majority stake in Aircel. Maxis having entered India through Tamilnadu now wants to consolidate further in Karnataka and Punjab by buying out B.K.Modis out of Spice Telecom. Modis hold 51% stake in Spice.
Maxis is also the largest Telecom player in Malaysia and with further consolidation in India it might well be leading in the Asian corridor dream of Telcos.
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.
Very soon you will hear echoes in your vegetable market like, “Suniye, Suniye….., Reliance Mango Hungama; 1000 rupiah aam lou aur 100 rupiah cell phone call mufat karo” (Translated in English – Reliance Mango offer; Buy Mangoes worth Rs1000 and get to make 100 rupees worth cell phone calls free on Reliance). Now get ready to accept an offer from your vegetable salesman for cell phone.
Reliance and Tata telecom are all set to woo the rural masses of India. Their choice of channel partners are the intermediaries between villagers and the town/city businessmen like vegetable vendors, water-pump and pipes dealers, pesticide vendors, etc. Rural markets are something which the corporate India had ignored for a long time until the country’s largest consumer giant, Hindustan Lever Limited woke up to service their needs in early 2000. Now Reliance & Tata’s have not only identified this as a potential market, but they are also under Universal Service Obligation (USO) from the Communications and IT Ministry.
Reliance is optimistic about tapping over 6 lakh customers in 6000 villages of which 4000 villages already have Reliance conectivity now. Tata’s who were confused with which technology to adapt are slow in the game as they have substantial investments in GSM service provider Idea Cellular and now going with CDMA. Tata’s are having just 70 lakh customers and are hoping to add 20 lakhs more by the end of March 2006 of which majority thrust will be on rural customers mostly from the states of Karnataka, MP, UP(East and West), Punjab, Haryana and Rajasthan.
Orascom of Egypt controls upto 65% of Pakistan’s and 8% of Bangladesh’s cell phone market. It paid USD 1.3 Billion to buy 19.3% stake in HTIL – Hutchinson Telecom International Limited. HTIL is a subsidary of Hutschinson Whampoa group. HTIL operates with various Indian partners with Essar being the major Indian partner in Hutchinson Essar. With this deal, Orascom gets to indirectly hold 8% in Hutchinson Esaar which has 13 Million subscribers. Orascom will also get one board members seat on Hutchinson Essar. Orascom also has the right to increase its stake in HTIL and thus subsequently raise stake in Hutchinson Essar to 10%.
Lets take a closer look at Hutch – Orascom USD 1.3 Billion deal.
80% of HTIL’s subscribers are from Hutchinson Essar join venture. Hutschinson controls 42% of the venture while Essar Teleholdings control 33% and the balance divided between various Indian operators like Fascel, Kotak and BPL after they voluntarily merged their operations into the Hutch Essar venture.
Looking at what Maxis paid for Aircel acquistion, this deal appears to be very very expensive. Sure Hutch-Essar is a national operator, has higher growth rate and footprints in all the major circles and licenses for 6 more through the acquistion of Essar Spacetel. Orascom’s 8% stake will translate to 1.04 Million subscribers directly under its control for which it has paid Rs4,600 crores, which in-turn translates to paying Rs44,230/subscriber(USD950). Considering this deal, Maxis got a cake walk deal, presence in Tamil nadu and an entry into the world’s fastest growing telecom market.