Vodafone shareholders differ on Hutch-Essar bid

British telecom giant Vodafone's plans to acquire India's fourth-largest mobile operator Hutch-Essar has received mixed reactions from some of its key shareholders, with a few of them raising concern over the high valuation of the deal, media reports here said.

Fears were mounting among some shareholders that Vodafone would be forced to overpay in a much-hyped bidding war that is going on between various suitors from across the world, the reports said, without naming any disgruntled shareholder.

When contacted, a spokesperson for Vodafone declined to comment on whether an auction-like bidding war was inflating the valuation of the target company.

The official also declined to comment on whether it has sought or plans to seek support of its shareholders for the intended acquisition.

The world's largest mobile player is pitted against India's Reliance Communications, which made its interest public yesterday, as well as Essar, a minority shareholder in Hutch-Essar with a 33 per cent stake.

Hutch-Essar is reportedly being valued between 14-17 billion dollars, but none of the players interested in the company have confirmed the valuation.

While some shareholders are opposing Vodafone's interest in Hutch-Essar, others like Standard Life Investments have been reported by British dailies as supporting the deal.

Standard Life, which has 1.7 per cent stake in Vodafone, is supporting the bid, saying the strategy of pushing into emerging markets "bodes well" for future, 'The Times' said.

Two other newspapers - 'Independent' and 'The Telegraph', also reported that Vodafone's emerging market strategy has been supported by Standard Life.

Ringing riposte to telecom giant

India Inc is ready to stand up and slug it out. Even with a competitor who is prepared to ante up a staggering $17 billion (Rs 75,000 crore).

Anil Ambani talked tough on Thursday, while unveiling his ambitious plan to do battle with global telecom giant Vodafone. “The game is just beginning,” he said.

Ambani’s Reliance Communications and Vodafone are among the four combatants in the fray to buy out Hutchison from its telecom joint venture Hutchison-Essar. The others are Hutchison’s partner Essar itself, and the Malaysian telecom company Maxis.

Speaking on the occasion of the 75th birth anniversary of the late Dhirubhai Ambani, Reliance’s founder, Ambani claimed private-equity firms and banks had committed “more money” to support the Reliance Communications bid than it “will ever need”.

Ambani was confident he would be able to raise a sum which was a multiple of his entire group’s market value, leave alone Reliance Communications. “If you look at the top 10 private-equity players today, I have to look hard to find which one has not lined up to partner us in the bid,” he said. “It is a myth that private equity only provides funds through equity.

They also provide debt through syndicated loans, and they also underwrite loans. The total funds available are well beyond our needs.”

But Vodafone is no mean opponent. It has revenues of over 29 billion pounds (Rs 253,860 crore), more than the Anil Dhirubhai Ambani Group’s entire market capitalisation and almost nine times its current group turnover. This year alone, Vodafone has gobbled up 11 telecom companies, for a total of $13 billion.

Rel Comm lines up $1.5 bn for Flag

Telecommunications major Reliance Communications will invest $1.5 billion (around Rs 7,000 crore) in Flag Telecom, its under-sea cable subsidiary, over the next three years.

The investment will help lay an additional 50,000 km of optic fibre cable and expand the company’s reach to over 60 countries.

“Over the next three years, Flag Telecom will build the world’s largest internet protocol (IP) network over submarine cable systems. Termed FLAG-Next Generation Network (FLAG NGN), the project will cater to over 5 billion customers across the globe,” Reliance Communications Chairman Anil Ambani said here today.

He added that Flag Telecom should become the third largest undersea cable system player in the world once the project was commissioned.

Next Generation Network (NGN) is a broad term used to describe some key architectural advances in telecommunication core and access networks.

The idea behind NGN is that one network transports all information and services (voice and data included) by encapsulating them into packets — similar to what the Internet does.
Flag’s global network will span 1,15,000 km by December 2009, taking the total optic fibre assets of Reliance Communications to over 2,30,000 km. The company would fund the project through internal accruals and debt, said Ambani.

At present, Flag Telecom operates the world’s largest private under-sea cable system spanning 65,000 km and has a customer base of over 200 leading operators, which include the top 10 international carriers.

Flag NGN will comprise four networks, with the first being an Asia connectivity link. The link will connect India, Malaysia, Indonesia, Vietnam, the Philippines, Brunei and Hong Kong.

The second system will be for the African region and will connect Kenya, Mozambique, South Africa, Tanzania, Madagascar and Mauritius. The third will be for the Mediterranean region and connect countries like Greece, Cyprus, Turkey, Malta, Libya and Lebanon, while the fourth will be a trans-Pacific link connecting the US west coast, Japan, China, and Hong Kong.

Flag’s global network will have a capacity to carry 2.5 billion simultaneous voice calls, 300 million simultaneous web chat, and 52 million simultaneous video chat, and enable 20 million students in Indian educational institutions to pursue e-learning simultaneously.

Reliance Communications had acquired Flag Telecom for $207 million in October 2003 

RCL needs $21b to buy 100% in Hutch

The sum required is around $21 billion, if Anil Ambani wants to buy out 100% of HTIL. This is an acquisition, and not a merger. So offering RCL stock in exchange for HTIL share may not be possible. In other words, current owners of HTIL — Hutchison Whampoa or say Essar Group — may want cash. This makes the whole situation different.

RCL at this point has a balance sheet size of around Rs 36,508 crore or $8.2 billion at the end of September 2006. In this, there was cash of around Rs 10,308 crore or $2.32 billion. RCL’s debt equity ratio is 0.7, with total equity of over Rs 18,200 crore and debt of over Rs 12,300 crore.

RCL is in an investment mode in its own business. Analyst reports suggest that RCL will be investing around $2 billion per year for the next two to three years. Its own operations will generate operating cash flow of roughly an equal amount. So overall, RCL may at best be able to put up $2 billion at this moment.

That leaves a gap of about $19 billion, which may have to be raised from outside, if the deal has to be closed within the near future. This is twice the current balance sheet size. No company would like to triple its balance sheet overnight, whichever combination of debt and equity one may look at.

Mr Ambani has already indicated that a special purpose vehicle (SPV) would be the preferred route. This means RCL directly would not try to acquire HTIL, but through an SPV, in which RCL could have 100% or less stake. This SPV would raise the required $21 billion or so, to close the deal.

An SPV offers great financial flexibility in such a situation. For example, take the equity component.

The Reliance-ADAG can choose to invest 100% of the equity portion, or invite co-investors right upfront. Or, it can invest 100% of the equity initially, and dilute to a strategic or financial investor later. Two private equity giants — Blackstone and Carlyle — are already a part of ADAG’s consortium.

These are big private equity funds with the ability to put serious money into any transaction. Plus, four large global banks — Citibank, Deutsche Bank, UBS and Barclays — have already committed about $5 billion each to the transaction. These commitments are exclusive, which means that they won’t work with anybody else.

Another major advantage of SPVs is the ability to raise debt at substantially higher debt/equity than you would normally do in a listed company. Called leveraged buyout (LBO), here the D/E can be as much as 9:1. LBOs become possible in an SPV situation as cash flow of the target company can be pledged as collateral for the debt raised.

The sum required is around $21 billion, if Anil Ambani wants to buy out 100% of HTIL. This is an acquisition, and not a merger. So offering RCL stock in exchange for HTIL share may not be possible. In other words, current owners of HTIL — Hutchison Whampoa or say Essar Group — may want cash. This makes the whole situation different.

RCL at this point has a balance sheet size of around Rs 36,508 crore or $8.2 billion at the end of September 2006. In this, there was cash of around Rs 10,308 crore or $2.32 billion. RCL’s debt equity ratio is 0.7, with total equity of over Rs 18,200 crore and debt of over Rs 12,300 crore.

RCL is in an investment mode in its own business. Analyst reports suggest that RCL will be investing around $2 billion per year for the next two to three years. Its own operations will generate operating cash flow of roughly an equal amount. So overall, RCL may at best be able to put up $2 billion at this moment.

That leaves a gap of about $19 billion, which may have to be raised from outside, if the deal has to be closed within the near future. This is twice the current balance sheet size. No company would like to triple its balance sheet overnight, whichever combination of debt and equity one may look at.

Mr Ambani has already indicated that a special purpose vehicle (SPV) would be the preferred route. This means RCL directly would not try to acquire HTIL, but through an SPV, in which RCL could have 100% or less stake. This SPV would raise the required $21 billion or so, to close the deal.

An SPV offers great financial flexibility in such a situation. For example, take the equity component.

The Reliance-ADAG can choose to invest 100% of the equity portion, or invite co-investors right upfront. Or, it can invest 100% of the equity initially, and dilute to a strategic or financial investor later. Two private equity giants — Blackstone and Carlyle — are already a part of ADAG’s consortium.

These are big private equity funds with the ability to put serious money into any transaction. Plus, four large global banks — Citibank, Deutsche Bank, UBS and Barclays — have already committed about $5 billion each to the transaction. These commitments are exclusive, which means that they won’t work with anybody else.

Another major advantage of SPVs is the ability to raise debt at substantially higher debt/equity than you would normally do in a listed company. Called leveraged buyout (LBO), here the D/E can be as much as 9:1. LBOs become possible in an SPV situation as cash flow of the target company can be pledged as collateral for the debt raised.

Telecom companies struggle to restore connections

Asia was slowly recovering yesterday from one of the biggest telecommunication outages to hit the region in years as crews scrambled to rig up new phone and Internet networks to replace those snapped by Tuesday night's earthquake off southern Taiwan.

Although stock markets in the region functioned normally, access to overseas Web sites remained patchy, as did dialling telephone numbers across Southeast Asia and in the US.

Millions of people dependent on the Internet for news, stock prices and e-mail were reminded of life before the World Wide Web.

Telecommunications operators in Taiwan and Hong Kong warned that completely solving the problem could take three weeks.

At least six undersea cables which pass near Taiwan are broken and a seventh is damaged, said Au Man-ho, director general of Hong Kong's Office of Telecommunications Authority.

"If only one cable is damaged, the impact will be insignificant," Au said. "All seven cables are damaged. That has not happened before."

Four cable ships rented by Chunghwa Telecom Co should arrive off southern Taiwan -- where the company's two damaged undersea cables are located -- by Tuesday, a secretary to Chunghwa vice president Leng Tai-feng (冷台芬) said by telephone last night.

The secretary said the company is working with other operators to fix the cables damaged by the 6.7-magnitude quake that killed two people. The cables would take at least two weeks to fix, she said.

The crews would need to find the fault, survey the conditions and pull up the cables for repair, Lin Jen-hung (林仁紅), vice-general manager of Chunghwa, said earlier yesterday.

Renting the cable-repair ships will cost US$25,000 per boat per day, Chunghwa said. It said boats would be coming from Yokohama, Busan, Manila and Singapore.

Chunghwa said that most of its overseas phone and Internet services were restored by renting capacities from other telecom operators or rerouting traffic to alternate communications lanes.

As of press time, Chunghwa said 80 percent of its overseas phone service was restored, while only one-third of phone calls to some Southeastern Asian nations were connecting. But Internet service was fully recovered, it said.

Chunghwa said in a filing to the Taiwan Stock Exchange that its revenues would drop about NT$100 million (US$3.06 million) because of the disruptions. It would also have to pay about NT$50 million to repair the cables and rent cable capacities.

Meanwhile, China Telecom, China's largest fixed-line operator, said the disruption in the cables was causing severe Internet congestion in that country.

Six of 10 international cables connecting South Korea were affected, according to KT Corp, that country's largest phone company. But KT said more than half of its 92 damaged lines should be fixed by last night.

Hong Kong said its roaming and long-distance phone service was restored. Officials said five maintenance ships had been sent out to repair the cables.

Japan's major carriers said most of their international and fixed-line phone services were back up. 

Airtel launches services in MP, Chhattisgarh

With the launch of its cell phone services in the tourist destinations of Mandav and Kanha, Bharti Airtel has claimed to become the only service operator providing world class services to almost all the tourist destinations of Madhya Pradesh and Chhattisgarh.

Maheshwar, Omkareshwar, Ujjain, Bhedaghat, Sanchi, Bhimbetka, Chanderi, Orchha, Khajuraho, Bandhavgarh and Panna in MP and Bastar in Chhattisgarh are already in its coverage area.

Airtel's chief operating officer Sunil K Goyal told mediapersons here last evening that expansion of services would support the growth of tourism and infrastructural sector in both states.

Millions of domestic and foreign tourists visit these places and they will enjoy largest coverage not only in MP and Chhattisgarh but also in more than 250 networks across 165 countries, he added.

Goyal said 389 towns and more than 9,000 villages across both states were under Airtel's network. According to the figures from Cellular Operators Association of India, Bharti has registered the 199 per cent growth in the circle in last 12 months. Its subscriber base has increased from 3,38,435 in November 2005 to 10,13,444 in November 2006. 

Vodafone mum on formal bid as battle for Hutch becomes three-way

Vodafone, the world's second-largest mobile phone operator, flatly refused to confirm a formal bid for Hutchison Essar six days after publicly expressing an interest in it, even as unnamed sources within the company claimed its approach to the Indian operator valued it at nearly 18 billion dollars.

Vodafone sources told TOI on Thursday that "media speculation" of a formal bid was "baseless" and the group was still at the preliminary stage in the battle for Hutchison Essar, that is its "board's official confirmation of an interest in the Indian company".

The sources said nothing had changed vis-à-vis Vodafone and Hutchison Essar since last Friday, December 22, when its board had formally given chief executive Arun Sarin carte blanche to push forward the Group's interest in acquiring a substantial stake in Hutchison-Essar because of India's status as the world's fastest growing mobile phone market. The board had said this was in line with Vodafone's strategy to expand in fast-moving markets.

Even as unconfirmed reports from London and Hutchison headquarters Hong Kong said Sarin had dropped in there over the weekend "in connection" with a formal bid, close-mouthed Vodafone sources insisted the company was nowhere near that stage.

Vodafone sources dismissed reports that "people close to the talks" had let the cat out of the bag by leaking news of a formal bid.

Vodafone's denial of a formal bid came amid raging speculation that the battle for Hutchison had become a fiercely-fought three-way bidding war with Hutch's minority shareholder, Essar, pitching in as well with an offer to buy Hutchison Telecom's stake in India's fourth largest mobile operator.

Observers said that on a day of apparent backroom moves and out-of-sight chessboard stratagems, Essar appeared to have put its oar into the hitherto-anticipated straightforward two-way fight for Hutchison Essar between Vodafone and Reliance Communications.

Essar, the joint venture partner in Hutch-Essar with a 33-per-cent stake, is reported to have offered 11 billion dollars to buy out Hutchison's share. Vodafone's furiously-denied offer of 18-billion-dollars is seen to be way above the minimum mark (of 14 billion dollars) set by Hutchison Essar as an acceptable price to sell.

The Financial Times, London, said on Thursday that Vodafone planned to put aside an extra two billion dollars as part of extra costs associated with the deal, in what many market analysts said, was a "luxury, Rolls-Royce sort of buy-out scenario".

The fever-pitch speculation over the battle for Hutch grew more frenzied, meanwhile, with yet another British newspaper claiming that the brothers Ruia, who own and run Essar, had fallen out over the bid for Hutch.

The Times, London, claimed that Essar chairman Shashi Ruia and vice-chairman Ravi Ruia were at loggerheads over whether to sell their one-third stake in Hutch-Essar or play an even bigger hand and acquire Hutchison Telecom's 67-per-cent share.

With Essar reported to have lined up 10 billion dollars in credit from Morgan Stanley and Citibank to buy out Hutch Telecom, Shashi is seen to have won this round of the battle. 

Asian quake disrupts phone, data service

With one blow, Mother Nature triggered the largest telecommunications outage in years, cutting off or slowing telephone and Internet traffic in Asia from Beijing to Bangkok, Thailand.

A powerful earthquake off the southern tip of Taiwan late Tuesday damaged up to a dozen fiber optic cables that cross the ocean floor south of Taiwan. They usually carry traffic among Taiwan, China, Japan, the Korean peninsula, Southeast Asia and North America. 

The magnitude 6.7 tremor, which struck near the town of Hengchun, killed two Taiwanese and injured more than 40 people.

It also showed the vulnerability of the global telecommunications network.

Chunghwa Telecom Co., Taiwan's largest phone company, said the quake damaged several undersea fiber lines, and repairs could take two to three weeks.

A Taiwanese telecommunications official said today that 95% of Asia's earthquakedisrupted data transmission service and 80% of its phone service was close to being restored.

Lin Jen-lung, vice general manager of Chunghwa, also said four ships with crews to repair the undersea data transmission cables ruptured in the earthquake would arrive in the affected area Tuesday.

Taiwan lost almost all of its telephone service to Japan and China. Connections to the U.S. also were hit hard, with 60% of capacity lost.

Later, Chunghwa said links to the U.S., China and Canada were mostly restored, but 70% of service to Japan was still down, along with 90% of the capacity to Southeast Asia.

Stephan Beckert, an analyst with the Washington-based research firm TeleGeography, said it was the largest telecommunications failure in years.

"The magnitude of the break is surprising because Taiwan is otherwise a very well-connected system," Beckert said.

He noted that cables were cut and disrupted frequently but there's usually enough backup capacity on other lines to keep traffic flowing without customers noticing an interruption.

But with multiple cables broken at once, Internet traffic around the Pacific was disrupted.

Hong Kong telephone company PCCW Ltd., which also provides Internet service, said the quake cut its data capacity in half. Internet access was cut or severely slowed in Beijing, said an executive with China Netcom, China's No. 2 phone company.

The Internet Traffic Report website, which monitors Internet connectivity in several countries, showed that packet loss, or the percentage of data that failed to reach its destination, surged in Asia at the time of the earthquake, rising from about 10% to more than 40%.

On Wednesday afternoon U.S. East Coast time, the site showed limited connectivity to China, Singapore and Indonesia, while Japan and Taiwan were apparently back to normal.

KDDI Corp., Japan's major carrier of international calls, said its fixed-line telephone service was affected by the quake. Spokesman Haruhiko Maeda said the company was rerouting calls through the U.S. and Europe.

Korea Telecom of South Korea said the lines it used were damaged, affecting dozens of companies and institutions, including the Foreign Ministry.

In the U.S., Cisco Systems Inc.'s Linksys division warned that customer support call centers for its home networking gear were affected by the outage, but other companies with overseas call centers reported few problems.

Setback for Vodafone as Essar enters fray

Vodafone's ambitions in India suffered a blow yesterday after it emerged that India's Essar had launched a bid to buy out its partner in Hutchison Essar, the country's fourth-largest mobile telephone operator.

Vodafone's interest in Hutchison Essar emerged before Christmas and it admitted last week that it was considering launching a bid to acquire a controlling stake in the operation.

However, reports from India yesterday said Essar had tabled a bid of its own, valuing the business at $18bn (£9.2bn). Essar's ambitions have been backed by a $10bn line of credit from Morgan Stanley and Citigroup.

Vodafone had already attracted several rivals, who have been jockeying for position in recent weeks.

They have been told by Frank Sixt, Hutchison Whampoa's finance director, that the Asian conglomerate would only entertain offers "well in excess" of $14bn for the business. An offer of $13.5bn from private equity firm Texas Pacific and Maxis, a Malaysian mobile operator, has already been rejected.

Other potential bidders include Reliance Communications, the number-two mobile operator, which has joined forces with Blackstone, the private equity firm.

Essar's surprise move is understood to have been made in the past few days. Its officials are believed to have previously held talks with Vodafone about the UK company's intentions.

Essar's offer is the only firm bid on the table and its executives are expected to hold talks with Hutchison officials Hong Kong on Tuesday.

The company has pre-emption rights over Hutchison's shares, enabling it to take control as long as it is prepared to match the highest bid for the company.

Essar is controlled by the Ruia brothers, Shashi and Ravi, who are respectively chairman and vice chairman. They are listed as members of India's 40 richest businessmen.

Hutchison shares rose sharply after it gave confirmation that it had been approached by various parties regarding a possible sale of its stake in Hutchison Essar.

Investors have been excited at the news that the stake was becoming the subject of an auction. Hutchison believes it can call the shots in negotiations because of the potentially huge growth prospects in the mobile Indian market. The country has just 130 million users but a population of more than one billion.

There have been worries among UK investors that Vodafone might overpay to win the auction for a controlling stake in Hutchison Essar. However, they were eased yesterday with Essar appearing to hold by far the strongest hand thanks to its pre-emption rights.

Vodafone's shares finished yesterday up 1p at 143p. The company already has limited exposure to the market through its 10 per cent stake in Bharti Airtel, the biggest operator, although its prospects of taking control of that business are seen as "slim".

They would have to be sold should Vodafone take control of Hutchison Essar, and it would need to find partners because of Indian laws limiting the size of its holding to 74 per cent. Neither Hutchison nor Essar were prepared to comment yesterday.

Essar's other interests include steel, construction and oil. The company is based in Mumbai, having moved from Chennai where the brothers' father, Nand Kishore Ruia, started in business. Shashi Ruia was only 24 when he took control of the organisation following the early death of his father.

The family's business roots are in shipping and exports. It then made a move into construction, building most of the country's ports.

Essar entered the telecom marketplace in the 1990s. Its bid is likely to have the support of the Indian government, which has recently voiced concerns about telecommunications companies falling into foreign hands because of "national security issues".

The company hit a sticky spot in 1999 when it became the first Indian business to default on a foreign loan. After the default, Essar sought help from Indian financial institutions, asking them to buy the debt, but the talks broke down.

However, restructuring and an improvement in steel prices persuaded debt holders to accept rescheduled terms. 

Govt to review Internet policy

Concerned over the loss of revenue through grey market operations in IP telephony services and to clear the ambiguity regarding the new internet based services like IPTV, Telecom Regulatory Authority of India (Trai) has issued a consultation paper to review the policy of Internet services in the country.

“The government is contemplating reviewing the policy of internet services with a view to address large number of ISP licenses, grey market operations, level playing field vis-à-vis other licensed telecom service providers, for an effective, regulated and forward looking ISP license,” a TRAI release said.

The department of telecom sent a reference letter to Trai seeking recommendations on internet services.

The consultation paper discusses the present scenario, the regulatory environment, and the emerging trends while emphasising the need to revamp internet services in India.
Internet services in India were launched in 1995 and opened to private players in 1998. Though 389 internet service providers (ISPs) licenses are issued, the top 20 ISPs provide internet services to 98 per cent subscribers.

Internet telephony licenses are given to 128 ISPs, however, only 32 of them are presently providing internet telephony.

Thus, the present growth is not likely to achieve the target of 18 million internet subscribers and 9 million broadband connections by 2007, the release added.

"New services like IPTV and IP telephony are becoming very popular. The demand of various content services is likely to increase in the coming years. The scope of the services under the existing ISP license conditions are unclear. There is a need to remove these ambiguities to smoothen the roll out of these services while ensuring a level playing field with other licensed telecom operators," Trai said. 

Ruias may stay back as Orascom partner

If they decide to exit, the Orascom-Qatar Telecom combine would need to find an Indian partner.

“There are no permanent enemies in business. The Ruias may decide to remain partners in Hutch Essar with Orascom,’’ said a source.

As a matter of fact, there has been speculation that the Ruias may join hands with the Orascom-Qatar Telecom duo to make a bid for HTIL’s 67% stake, thereby becoming a majority shareholder in Hutch Essar. However, this has been vehemently denied by Essar. “Given the fact that Orascom’s security issue is pending with the PMO, the question of a tie-up with the Egyptian company does not arise,’’ said an Essar official.

If this combination decides to go ahead with the deal, it would leave Reliance Communications out in the cold. Moreover, Vodafone will also find it difficult to muscle in, since the Essar-Orascom combination already has a substantial stake in Hutch Essar.

Of course, everything hinges on the final valuation; whether the Ruias buy or sell will depend on what the bidders are willing to pay. “At the right price, everything is up for sale.

There are two clear groups in Essar — one opposing the sale and the other encouraging it. After all, Rs 25,000-crore plus is a big booty for a group which had, till not very long ago, financial institutions knocking at its door for interest repayments on loans,” says a source close to the negotiations.

Another possible reason for the tie-up between Orascom and Qatar Telecom for acquiring Hutch is that India does not consider investments from Qatar as a security threat. Qatar Investment Agency is currently considering an investment of $5 billion in energy-related projects in India. Qatar is also picking up an equity stake in the LNG terminal that had been hived off from the main Dabhol plant for about $100 million. Besides, India has invited Qatar to participate in NTPC’s Kayamkulam project in Kerala and ONGC’s upcoming petrochemical hub at Mangalore.

During his visit to India earlier this month, Orascom Telecom CEO Naguib Sawiris had said the company could bid for a controlling stake in HEL, if it were to get a green signal from the Indian government.

Mr Sawiris had also said Orascom was open to picking up a direct stake in Indian telecom companies, if the Indian government provided clarity over FDI and security-related issues.

“A country that is looking at $300-400 billion investments must not club security with investments . It is a dangerous mix. Our company is not a security hazard to India just because we operate in Pakistan. The fact is that Hutch Essar is managed by Indians. When you have $10-15 billion investment in this country, by virtue of that you become a protector of this country,” Mr Sawiris had said.

For Orascom, the buyout of HTIL’s stake in Hutch Essar will see its subscriber base rise to 75 million (from 52 million currently), and also provide a direct footprint in the world’s fastest-growing telecom market. It will also make it the biggest telecom player in the Indian sub-continent as it already has operations in Pakistan and Bangladesh. 

Cos on route to crack Rs 2,000 barrier for colour handsets

The swelling Indian mobile user base can hope to see much more action in 2007, with the year likely to ring in sub-Rs 2,000 colour handsets, sub-Rs 1,000 monochrome handsets, a possible 3G rollout towards the end, and much more in value-added services.

While Thaiwan, China and Korea have bagged deals to produce low-cost handsets for India, the department of telecom is expecting fresh investments worth $2 billion in telecom manufacturing next year, in addition to this year’s commitment of $1.5 billion.

Says LG GSM division head HS Bhatia, “I believe that the sub-Rs 2,000 colour handset would be possible by mid-2007. Companies are already working on cracking that barrier.” Year 2007 will also see PSU telecom operator BSNL launch sub-Rs 1,000 monochrome handset. The company is currently in talks with Taiwanese and Chinese handset manufacturers for the sub-Rs 1,000 handset. BSNL has begun preliminary talks with Taiwan’s Compal and China’s TCL Communication Technology (TCT).

Companies like Texas Instruments have developed a single chip platform for handset companies to launch the sub-Rs 1,000 handset and has tested it with Nokia and Motorola products. Indian Cellular Association chairman Pankaj Mohindroo says, “The sub-Rs 1,000 monochrome handset is possible next year but I see Rs 1,200 emerge as the price point most handset companies would have products available at.”

Motorola launched its Motofone, priced at Rs 1,600, last month to establish supremacy in the Rs 14,400 crore entry-level handset market in India. Market leader Nokia’s entry-level handsets start at a price point of Rs 2,000.

Competition in the entry-level handsets has already led companies like LG to ink contract manufacturing deals with Chinese and Taiwanese OEMs like Arima for making cheaper handsets for the Indian market. Reliance has also inked a deal with Korean manufacturers Rose Telecom and Kedcom for supplying handsets priced at $30. These handsets are slated to hit the Indian market in Q1, 2007.

Domestic manufacturing has already seen leading handset companies and OEMs set up base in India. “While investments worth $1.5 billion were committed this year in telecom manufacturing, we expect a further commitment of $2 billion worth of investments in 2007,” a department of telecom (DoT) official said. In the higher-end segment, data-centric converged handset prices are expected to come down from Rs 25,000-35,000 currently to Rs 15,000 next year, Mr Mohindroo said. 

Alcatel-Lucent to invest $200mn in India

French telecom major Alcatel, which recently acquired Lucent, today said it will invest $200 million (about Rs 1,000 crore) in India every year over the next few years.

"Till now, we have invested more than one billion euro (close to Rs 6,000 crore), and are still continuing. Our future investment plans are to the tune of $200 million every year in various activities including R&D," Ravi Sharma, country head of Alcatel-Lucent, told PTI.

Alcatel, which has a manufacturing tie-up with ITI, has already made two plants at Mankapur and Rai Bareily operational, he said, adding more plants would be functional for manufacturing ADSL - an equipment used for offering broadband services.

With the acquisition of Lucent Technologies, the French telecom giant now has a reach in the emerging CDMA technology. In GSM services, Alcatel has a major share in the operations of state-owned service providers - BSNL and MTNL - and is also in talks with most of the private players.

Asked if a new entity would supply equipment to private firms, he said: "We are in talks with all new operators who are expanding operations including Reliance Communications." He, however, declined to give details.

Sharma, who will be heading Alcatel-Lucent's South Asia operations, said the company would offer solutions in the new wireless Wi-Max technology both in terms of infrastructure and customer premises equipment (CPE). Alcatel has a tie-up with C-DoT for CPE and with ITI for manufacturing base stations.

Sharma claimed the company has 50% market share in fixed line telecom, and 70% in submarine operations to create bandwidth. 

Vodafone, pvt equity investors lead race

Vodafone and a consortium of private equity funds led by the Texas Pacific Group (TPG) have forged ahead in talks for acquiring Hutchison Telecom International Ltd’s (HTIL’s) 67% stake in India’s fourth largest mobile operator, Hutchison Essar, sources close to HTIL said on Sunday. This suggests that Anil Ambani’s Reliance Communications (RCom), once thought of as a frontrunner, has fallen a bit behind in the race.

“Initial talks with Vodafone and equity funds led by TPG have advanced, while the discussions with others are still preliminary in nature,” a source familiar with the development told PTI, discarding reports that bids had been made for HTIL’s stake in Hutchison Essar.

Even as the Indian media was abuzz with reports and speculation that HTIL has received five bids — from RCom, Vodafone, Malaysia’s Maxis, Egypt’s Orascom and the Ruias of Essar, who hold 33% in the venture - investment banking sources said: “Everything is just at a preliminary stage”.

While Vodafone can go ahead with its discussions on HTIL after having made its position public, sources pointed out that Anil Ambani’s Reliance Communications would have to await a decision by the Ruias on whether or not Essar would exit the venture. In case Essar decided to stay put, then RCom may not be able to go ahead with the venture due to regulatory norms in India, they indicated.

HTIL, owned by Kongkong magnate Li Ka-shing, has mandated Goldman Sachs for the sale of its stake in the India venture, whose enterprise value is being estimated up to $17-18 billion. Sources said that TPG, which reportedly has a tieup with Maxis, too, is also mulling the option of joining other equity funds for the bid, including US’s Blackstone and Kohlberg Kravis Roberts.

Earlier, some of these funds were reported to have joined a consortium led by Reliance Communications, but there is no official confirmation.

Asked for the reasons for the funds exploring the option of going on their own, sources said that purely as equity investors these funds are unhappy about the hype and hoopla being created on HTIL’s stake, as it was pushing up the valuation.

It may be recalled that five equity funds had come together last year to acquire a controlling 88% stake in Danish Telecom firm TDC for $15.6 billion.

Meanwhile, another investment banking source said that UBS, mandated by Vodafone as advisor for the Hutchison Essar deal, could no longer be involved in arranging funds for the Reliance consortium.

A PTI report from Hongkong quotes an HTIL spokesperson as saying that the company had been “approached by various parties and discussions are on.”

Referring to the first right of refusal that the two partners in Hutchison Essar have, sources pointed out that whatever may be the top offer, HTIL would have to first inform Essar. The Ruias of Essar will then get an opportunity to match the bid or forgo the right. There was, thus, no need for them to make a bid, sources said, adding that Essar is yet to take a call on whether to stay put or sell off their equity in the venture.

Meanwhile, British newspaper Financial Times reported that RCom was in talks with at least four equity funds - Apax Partners, Blackstone, Carlyle and KKR - for combining forces to make an offer for Hutchison Essar. 

Interconnect jolt to GSM players

Telecom tribunal TDSAT today rejected GSM mobile operators’ petition challenging Trai’s direction to remove differential tariffs for calls ending in BSNL and MTNL networks.

The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) bench, headed by Justice Arun Kumar, said there was no merit in charging higher tariffs.

“We do not agree with the arguments put forward by COAI for charging higher tariff,” the tribunal said in its judgment, which comes as a setback to GSM mobile operators.

However, the tribunal directed BSNL and MTNL to provide leased lines for interconnection between the operators in a time-bound manner.

The Cellular Operators Association of India (COAI), the GSM body argued their cost was much higher due to absence of direct connectivity in intra-circle calls. These had to be routed like STD calls. This necessitated higher tariffs, it said.

“We have to pay more for our call if it originates from our network and terminates in BSNL’s or MTNL’s,” said COAI, adding that the nature of call becomes different if it terminates in BSNL’s network.

COAI had challenged Trai’s directive on February 26 to private cell operators to stop charging differential tariffs for calls terminating on the BSNL CellOne network in four states.

In these four states, the government has permitted direct connectivity between Mumbai and rest of Maharashtra, Calcutta and West Bengal and similarly between Chennai and rest of Tamil Nadu and two parts of Uttar Pradesh (east and west).

However, operators still charged higher tariffs for calls terminating in BSNL’s CellOne network.

“These operators have still not taken the lease line between the two circles of the states and are routing their calls through national long distance service operators,” said the Trai counsel, adding that the operators were themselves responsible for high call costs.

Earlier, Trai had accused private GSM operators of acting as a “cartel” against MTNL and BSNL and charging higher tariffs from customers for calls terminating in the networks of the two companies.

Number crunching Hutch's value

More players are entering the fray to pick up a stake in Hutch. And as numbers are bandied back and forth, one thing is certain - the company's valuations are attractive. After all, Hutch clocks the highest revenues per minute, beating rivals Bharti Airtel and Reliance Communications hands down.

And while it lags behind its rivals, when it comes to average revenues per user, it pips them in the minutes of usage. On these terms, Hutch makes more per minute of usage, than either Reliance Communications or Airtel. Hutch also offers better value-added services, which helps boost its revenues.

For the third largest player, which commands a near-pan India presence, analysts are quoting an enterprise value of around USD 12-14 billion. Compared to Reliance Communication's enterprise value of USD 22 billion and Bharti's USD 26 billion, that's a pretty reasonable figure.

And that's not all! Going by these valuations, the cost of one Hutch customer works out to USD 556-646. It's bang in the middle of the range at which recent global deals have been clinched between USD 450 and 1,000 per subscriber, while that of Hutch's rivals works out at the higher end of the range.

The price at which the deal is finally struck, will determine exactly how attractive the purchase will be. It will also determine the final cost breakeven. And with so many players vying for a piece of the cake, the final price is anybody's guess.

Maxis puts Aircel Cellular rebranding on hold

Maxis Communications, Malaysia’s largest telecom operator, has postponed rebranding of Aircel Cellular (in which it has 74% stake) to Maxis.

This is because it is in the race to buy Hutchison Essar (HEL) and feels that if it wins the bid for the No 3 Indian telco, it could merge it with Aircel Cellular for a combined rebranding exercise.

Aircel’s name will be changed only after Hutch promoters declare the name of its acquirer. As ET had reported, Maxis Communications had put in a fresh bid for Hutchison International’s (HTIL) 67% stake in HEL last week after its earlier bid (jointly with Texas Pacific Group) was rejected. Maxis has gone alone for its second bid.

Sources said that Maxis officials had initiated talks with Hutchison Whampoa’s group MD Canning Fok last week and the talks are still on due to the new bid. Standard Chartered is advising Maxis Communications. HEL has 22.3 million subscribers (November 2006 figures) and a market share of 22.1% in the GSM space.

Aircel has 4.2 million customers and 4.2% market share. A successful buy-out of HEL will catapult the Maxis-Aircel combine to the third slot in India, behind Bharti Airtel and Reliance Communications. Maxis has always maintained that the company was looking at a larger footprint in the world’s fastest growing cellular market.

Last year, it had bought 74% in Aircel Cellular for $1.08 billion. Recently, Maxis, paid $300 million to the Indian government as entry fee for 14 circles and for national and international long distance licences for Aircel Cellular. Reliance Communications, however, continues to be the front-runner for acquiring HEL. Maxis has put in its bid despite speculation that R-ADAG would close the deal on December 28 (Dhirubhai Ambani's birthday) for an estimated $12-14 billion.

The R-ADAG group, which is being advised by UBS, has reportedly tied-up with private equity players like Black-stone, Texas Pacific, Carlyle and Kohlberg Kravis Roberts, among others, to finance the buy-out. Anil Ambani has been looking at an aggressive expansion in GSM, the technology used by 70% of India’s mobile population.

HEL will give Reliance Communications a ready GSM presence in 16 circles with a robust customer base of over 22 million, most of whom are high-end users and corporate customers. Macquarie Securities India, in its research note on Monday put the enterprise value of HEL at $ 13.7 billion and an equity value of $12.8 billion.

NXP enters into an alliance with SRV Telecom

Bangalore-based SRV Telecom said on Tuesday that it has entered into an alliance with NXP Semiconductors to design, develop and manufacture digital cordless phones in India.

For this, SRV will set up a new manufacturing facility in Bangalore before the end of April 2007, which will have an annual production capacity of around 2,000,000 phones after it is fully operational, a company release said here.

NXP, a company founded by Philips, will provide chipsets for the phone, while SRV Telecom will design, manufacture and market it in the country, it said, adding the phones will be targeted at home and enterprise markets.

"NXP Semiconductors' DECT phone chip-sets will offer a superior voice quality and low power consumption with the convenience and freedom of movement offered by mobile phones, in the home or office," NXP Semiconductors Vice President and Managing Director Rajeev Mehtani said.

It will also enable operators to provide over 40 million fixed line subscribers in India with a better handset experience, he said.

NXP Semiconductors is headquartered in the Netherlands and creates semiconductors, system solutions and software that deliver better sensory experiences in mobile phones, personal media players, TVs, set-top boxes among others.

Hutch to Offer i-mode Mobile Internet Service

NTT DoCoMo and Hutchison Essar (Hutch), have announced that Hutchison Essar will launch the i-mode mobile Internet service in India in 2007.

DoCoMo will license the patented technologies and know-how needed for Hutch to offer i-mode on GSM, GPRS and W-CDMA networks. Subscribers can then enjoy access to e-mail, games and a variety of Internet services through their mobile handsets.

Takeshi Natsuno, senior vice president and managing director of Multimedia Services, DoCoMo, said, "I am delighted that i-mode will be introduced in India, giving DoCoMo a foothold in this dynamic emerging market. We are excited about our alliance with Hutchison Essar, one of India's leading and fastest-growing telecom operators. This will certainly create new momentum for the expansion of i-mode into other Asian markets."

Asim Ghosh, managing director, Hutchison Essar said, "i-mode is the natural next step for us. At Hutch, we believe that mobile Internet is the way forward for the Internet and what better partner to have for this but i-mode. We are delighted that we will soon be able to offer this brilliant service to our customers."

More than 53 million people across the globe subscribe to i-mode, which are currently available in 16 countries/regions of Asia-Pacific and Europe — Australia, Belgium, Bulgaria, France, Germany, Greece, Ireland, Israel, Italy, Japan, the Netherlands, Russia, Singapore, Spain, Taiwan and the UK.

Hutch: To sell or not to sell?

Santa seems to be very kind this year to Hutch-Essar. It has Reliance, Maxis and Orascom putting money in the stockings but Hutch's sale will finally depend on whether Essar decides to sell, reports CNBC-TV18

Some say that come December 28th, Dhirubhai Ambani's birthday, Anil Ambani will announce the Hutch buyout. Others say that his trip to Tirupati is evidence enough that the deal is already done. But it's not that simple. Not atleast till Essar decides whether it's a buyer or a seller.

For now Essar seems to be holding all the cards in the Hutch deal. As 33% stakeholder it has the first right of refusal to any sale by Hutch. So that gives Essar two options. Either buy out Hutch's 67% stake or exit the venture with Hutch.Many industry players believe that Essar may prefer to sell out with Hutch as it has little managerial experience in telecom. Essar's final decision will depend though on what price other bidders are willing to offer for Hutch-Essar.

So till the Ruias don't make up their mind no other contender can strike the deal. That’s because telecom regulations say no telecom company can hold more than a 9.9% stake in a competing telecom venture.

It's for this very reason that the Tata group had to exit Idea cellular, as they are promoters of Tata Teleservices as well. And in the case of BPL Mumbai, Essar directly holds just a 9.9% stake in it. So while Reliance, Maxis, Bharti or Orascom are working with bankers and private equity partners to put in place acquisition funding, none of them can swing the deal unless Essar makes up it's mind

Battle for Hutch-Essar hots up

Reliance Communication, an Anil Ambani group company, Malaysia's Maxis and Egypt's Orascom are believed to be vying for acquiring India's third largest private mobile service provider Essar-Hutch, valued at an estimated $13-14 billion.

While there was no formal word from any of the interested players, discussions are on between the bidders and Hutchison's advisor Goldman Sachs for the deal that could become clear within a month, investment banking sources said.

Reports about the race between the three players for Hutch-Essar coincides with the arrival of Orascom's Chief N Sawiris to India along with Egypt's Foreign Minister AA Gheit, who will meet External Affairs Minister Pranab Mukherjee here on Saturday.

Reliance Communication, partnering four global equity funds -- Blackstone, Texas Pacific Group, KKR and Carlyle -- who collectively manage about $100 billion worldwide, is understood to be keen for a majority stake for which it has tied up its resources.

Reliance Communication, with cash reserves of $1.7 billion, raised another $1 billion as external loans from the international market and has appointed UBS as advisor for raising further debts and financial resources for its bid.

A spokesperson of Essar, which has a 33 per cent stake in the Joint venture, said that, "we do not comment on speculation," while Essar-Hutch Managing Director Asim Ghosh did not take questions on the subject.

Malaysia's Maxis, headed by Anand Krishnan, which has a majority stake in another telecom operator Aircel in India, is understood to have engaged Standard Chartered as its adviser.

Sandip Das, the number two executive in Hutch Essar had quit earthy this month to take charge of Maxis Malaysia as its CEO.

Orascom, which has more than 19 per cent stake in Hong Kong-based HTIL, owning 67 per cent stake in the Indian venture, is understood to have appointed Deutsche Bank as its adviser.

Orascom had been in news recently with intelligence agencies raising security concerns about its part holding in Hutch-Essar as it was a telecom service provider in Pakistan.

Essar is understood to have told its joint venture partners that it would not be averse to exit from the venture if the valuation was right.

Hutchison adviser Goldman Sachs is understood to be dealing with the three bidders and is believed to have communicated that a decision could taken in the next few weeks, investment banking sources said.

No official comment could be obtained from either the bidders or their advisers.

IBA plans Do-Not-Call-Registry for banking sec

To protect consumers from tele-marketers, Indian Banks' Association has launched an initiative to set up a common Do-Not-Call-Registry for the entire banking sector.

Under the current Reserve Bank guidelines, individuals who do not want to receive tele-marketing calls from banks, have to register with the Do-Not-Call-Registry (DNCR) of each bank separately.

To provide a one-stop solution, IBA in association with Indian Cards Council and MasterCard Worldwide has launched the initiative to establish a national centralised DNCR, which would enable the banks to operate from a shared platform and ensure that customers only need to register once with the common DNCR to prevent tele-marketing calls from both banks and their direct selling agents.

Taking the proposal forward, IBA on Thursday issued a 'Request for Proposal' for the common DNCR plan.

"Once in place, the IBA initiative will bring Indian consumers' banking experiences at par with the global standards," IBA said in a statement.

The tele-marketers would need to access the DNCR at least on fortnightly basis in order to ensure that the numbers they wish to call are not on the national Do-Not-Call-Registry.

Indian president voices concern over unsolicited calls on mobile

Sharing the concerns of millions of cellular phone users, who grudgingly put up with unsolicited calls, Indian President A P J Abdul Kalam on Thursday asked the telecom industry to effectively check this.

Inaugurating the 'India Telecom 2006' conference here, Kalam said, "Although some restrictions are in place for unsolicited telephone calls, there is a need for more effective control mechanism." 'India Telecom 2006' is organized by the Department of Telecom, and Federation of Indian Chamber of Commerce and Industry (FICCI) and Telecom Equipment Manufacturers Association.

He said advanced telecom technologies are capable of locating the position of the cell phone, its utilization pattern and the particulars of the contactees, leaving the individual open to avoidable exposure and exploitation by motivated agencies.

"Ethics for utilization of telecom tools and technologies also need to be evolved so that individual privacy is not intruded upon," the president said.

He also asked the telecom operators to make unlimited bandwidth available on demand for a billion people of India in order to connect the unconnected and said that 'we should aim that 70 percent of the telecom hardware and software should soon be manufactured in India'.

Meanwhile, addressing the conference, Indian Communications and Information Technology (IT) Minister Dayanidhi Maran said, "As it aims at making India a global hub for telecom manufacturing, fresh investment commitments of about two billion dollar (about Rs 9,000 crore) is expected in the next one year.

"Entry of Nokia into manufacturing followed by Flextronics, Motorola and a whole lot of others has laid the platform for positioning India as a global hub for telecom manufacturing," he said.

Since the UPA government took office in May 2004, India has witnessed investment commitments of over 17 billion dollar in IT and telecom.

According to the minister, growth targets set for 2010 would result in an investment of about 20 billion dollar with more jobs, contribution to GDP and revenue to government.

Over 200 companies are participating is the international exhibition and conference. In the exhibition the Indian telecom industry will be represented by companies like Bharti Airtel Limited, BSNL, C-DOT, Hutchison Essar Mobile Services Ltd, COAI, Qualcomm India Pvt Ltd. Reliance Communication Ltd. Etc.

Among the international participants there will be companies from Canada, China, Singapore, Hong Kong, and Italy while Taiwan, Korea and US companies will be seen in independent pavilions.

A highlight of India Telecom 2006 will be the CEO's Roundtable with Dayanidhi Maran, minister for Communications and Information Technology Government of India. It will be an interactive session of all the telecom CEO's with the minister.

Don’t ban telemarketing, plead GSM operators

GSM (global system of mobile communications) operators have told the Telecom Regulatory Authority of India (TRAI) that telemarketing should not be banned.

Rather, a ‘telemarketer-oriented solution’ should be provided for a “subscriber to stop unwanted commercial communications to her or his telephone”, they have pointed out through a letter written by the Cellular Operators Association of India (COAI), which represents the GSM firms.

While favouring a “specific legislation” to address the issue of unsolicited commercial communication, cellphone operators have suggested a “graded form” of penalty for those violating the `do-not-call’ or `do-not-disturb’ clause offered by various service providers and telemarketers.

The GSM players have argued that service providers are merely intermediaries, “who carry these calls that are originated by other companiesthird parties.”

“So,” they said, “there is no method available to them to verifydistinguish from the millions of calls passing through their network, whether a particular call is a unsolicited commercial or not”.

On whether measures by the Reserve Bank of India, banks or other agencies have been effective in reducing the number of unsolicited calls and messages, COAI said the efforts “to curb unsolicited commercial communications are not visible on the ground”.

Cellphone players also believe that “service related communications of a service provider are not in the nature of unsolicited commercial communications”.

According to them, such communication is required to be undertaken by service providers “for his business and commercial purposes, which includes informing subscribers about their pending bill payments, changes in any items of tariff plans, new tariff plans being offered etc.”

However, they have stated that any subscriber can access the ‘do-not-call’ or `do-not-disturb’ facility of a service provider, “and choose not be called”.

COAI represents GSM firms like Bharti Airtel, Hutch-Essar, Idea Cellular, Bharat Sanchar Nigam Ltd (BSNL), and Aircel.

The COAI letter was in response to a consultation paper floated by Trai last month on telemarketing and unsolicited calls.

Trai had sought industry views on the options of blocking unsolicited commercial communication. After listing the various methods of restricting the telemarketing menace, the regulator had proposed to the Department of Telecommunications (DoT) for a “comprehensive amendment in the Trai Act to strengthen powers of the Authority” to impose penalty on those who violate norms on telemarketing.

Reliance keen on Hutchison India phone assets-reports

India's Anil Ambani group is teaming up with U.S. private equity funds to bid for the Indian mobile phone operations of Hutchison Telecommunications International, in a deal valued at more than $14 billion, newspapers said on Wednesday.

Ambani, who controls Reliance Communications Ltd., had previously held talks with Carlyle [CYL.UL] and Blackstone [BG.UL], and is now in discussions to include Texas Pacific Group [TPG.UL], the Financial Times said.

A bid for the Indian assets of Hutchison Essar, which is 67 percent-owned by Hong Kong tycoon Li Ka-shing's Hutchison International, could be worth more than $14 billion, the newspaper said, without identifying its sources. CLSA said in a research note earlier this week it estimated Hutchison Essar at an equity value of $14.4 billion.

India's Economic Times newspaper said on Wednesday Reliance is in talks with Kohlberg Kravis Roberts & Co. [KKR.UL] to form a partnership along with Texas Pacific Group and Blackstone.

"It is very preliminary as of now," a person familiar with the talks told Economic Times.

A spokesman for Reliance Communications did not immediately comment.

A successful bid by Reliance, India's second-biggest mobile services firm, would boost its GSM business, which lags its CDMA operations, catapult it to number one position in India and give it dominance in the lucrative Mumbai market.

Reliance also competes with leader Bharti Airtel Ltd. and state-owned Bharat Sanchar Nigam Ltd. Hutchison Essar is the fourth-ranked mobile services provider.

Hutchison Whampoa in November scrapped plans to list the Indian unit after disagreements with Essar over a proposed merger of another mobile operator purchased by Hutchison Essar.

The Economic Times also said Texas Pacific, along with Malaysia's Maxis Communications, had recently made a bid for Hutchison-Essar, but was turned down.

India is the world's fastest growing wireless services market, thanks to cheap call rates and low penetration of mobile facilities. India's mobile user base has topped 136 million. (Additional reporting by Asia Desk)

GSM base crosses 10 cr users

India, the world's fastest growing wireless market, has emerged as the third biggest GSM market with 10 crore subscribers as cellular operators sustained their aggressive growth in November.
GSM operators set a new record in November by adding 50 lakh users, after adding 47 lakh subscribers in October.
The all-India GSM subscriber base in the country has touched the 10 crore mark at the end of November 2006 compared to 9.6 crore as on end October 2006, Cellular Operators Association of India said in a statement.
With this, India has now joined the elite club of countries having more than 10 crore GSM subscribers.
"In terms of GSM subscriber base, India is now placed third after China and Russia," it said.
COAI Director General T V Ramachandran said the GSM industry and COAI were delighted at the achievement of the 10 crore milestone.
"GSM has been the primary engine of growth in telecom in India and will continue to be the major contributor to the growth in teledensity in the coming years," he said.
Among all circles, Category C circles witnessed the highest rate of growth at 6.9 per cent, followed by Category B circles at 6.1 per cent. Within Category C, Bihar and Assam recorded the highest growth at 8.5 per cent and 8.4 per cent respectively. In Category B circles, the highest growth was recorded by Haryana and MP at 9.6 per cent and 6.9 per cent.
Category A circles also witnessed a healthy growth of 5.4 per cent in November. Andhra Pradesh recorded the highest growth of 6.6 per cent, followed by Gujarat at 6.2 per cent.
Metro subscribers grew 2.6 per cent over the previous month. Mumbai recorded the highest growth at (4.1 per cent), followed by Delhi (2.9 per cent).

DoT rejects number portability move

The department of telecommunications (DoT) has rejected the Telecom Regulatory Authority of India’s (Trai) recommendation that mobile number portability be implemented in a phased manner from April 1, 2007. The DoT has said that portability is not a mandatory service and the timing of its implementation should be left to the commercial judgment of operators.

Number portability ensures that mobile phone numbers do not change even if users switch operators.

Reasoning in an internal note, the DoT has said that the cost of network upgrade for number portability works out to Rs 940 crore and in today’s competitive environment, it may not be appropriate for either the regulator or the licensor to ask operators to share the cost amongst themselves. Rather, such a step should be left to the commercial judgment of operators.

The DoT has also said that number portability cannot be implemented across technologies like GSM and CDMA in the absence of dual handsets.

Trai had submitted the recommendations suo-motu and they were not covered under the relevant clause of the Trai Act 1997. Therefore, in the event of the recommendations being not accepted, it will not be necessary for the DoT to refer them back to Trai before taking a final decision.

Number portability is already on in the US, the UK, Australia, Germany, France, the Netherlands and Singapore.

In India, however, most telecom operators had opposed the move, stating that fixed number portability should be implemented first. In fact, the Cellular Operators’ Association of India had even got a survey conducted by a market research firm, which concluded that mobile number portability was not a must for cellphone users.

But consumer organisations had favoured the move.

Illegal users? Telecom operators to be fined

Telecom operators will have to pay a penalty and immediately de-activate a pre-paid mobile connection if they fail to follow the new norms issued by the government to strengthen the subscriber verification system.

As per the norms, if after March 31, 2007, any subscriber number is found out to be without proper verification, a minimum penalty of Rs 1,000 per violation would be levied on the licensee, Department of Telecom sources said.

The new norms, issued on November 22, follow the meeting by DoT on September 27 this year, where it was decided that the guidelines will be scrupulously adhered to for the purpose of supplementing the existing information.

Further, the authorised person selling SIM cards would have to record in the application form that he has seen the subscriber and verified his documents with the original. In this regard, the operator would have to aware the seller about his responsibilities and liabilities in the matter.

Pre-paid SIM cards, which make 80 per cent of the mobile connections, would be activated only after the customer acquisition form has been properly filled and copies of documentary proof submitted by the customer.

The authorised seller, who is directly accountable to operators, would have to verify that all the documentary requirement has been completed before activating the SIM card.

Sources said if any discrepancy was found at any stage, the connection would have to be de-activated immediately, but in any case not later than 72 hours.

VSNL, TCS in talks to bag Cable & Wireless contract

Two Tata group companies — Videsh Sanchar Nigam (VSNL) and Tata Consultancy Services (TCS) — are in talks with Cable & Wireless for jointly providing IT and business solutions to the global telecom giant. According to sources, if talks between the two Tata group companies and Cable & Wireless are successful, the latter is likely to outsource a considerable chunk of its IT, software and networking requirements to the Indian companies.

This could involve the two Tata group companies jointly providing services such as system integration, system management, network management and other value added services like security and firewalls for Cable & Wireless, sources said. “While VSNL is a global networking major, the tie-up with TCS provides clients with a converged network IT solutions platform. Besides, under this business model, there are not many external dependencies,” explained a source.

If successful, this is likely to rank among the major IT deals bagged by Indian companies as Cable & Wireless provides telecom related services in 34 countries. Cable & Wireless operates through two standalone business units — International and UK.

The International business unit operates integrated telecommunications companies in 33 countries offering mobile, broadband, domestic and international fixed line services to residential and business customers, with principal operations in Caribbean, Panama, Macau, Monaco and Channel Islands.

When contacted, a TCS spokesperson said, “TCS is in discussions with Cable & Wireless on a range of business issues, just as we are with a large number of global corporations. The talks with Cable and Wireless are at a preliminary stage and it would be premature to make any further comment on this issue.”

VSNL sources said that this was also part of the company’s strategy to “re-engineer” its business model, where it planned to move away from being just a pure-play long distance service provider to an information and communication technology (ICT) services provider. Besides, VSNL individually is working towards expanding its managed services portfolio to include disaster recovery and business continuity processes, managed e-mail and IT security.

These services require IT implementation, virus protection software and other IT support which will be provided by TCS. Cable and Wireless will also be able to access these services if the two Tata companies clinch the deal, sources added.

Centre bans pre-activated SIM card sale in border areas

After bringing cell sites near the border under greater scrutiny, the Government has tightened the verification procedures for the issue of mobile phone connections.

In a directive to mobile phone companies, the Government has banned the sale of pre-activated SIM (subscriber identification module) cards. It has also asked mobile companies to verify their entire customer base on a "priority" basis by March 31, 2007.

A minimum penalty of Rs. 1,000 will be levied for each phone operating without verification. The companies have been asked to initiate the verification process of all existing subscribers by calling up each one of them and asking for details. "There shall not be any connection working after March 31, 2007 in the licensee's network without having unverified subscriber information," the directive said. The move comes after several meetings on the issue between representatives of the Communications Ministry, security forces and intelligence agencies in the wake of three soldiers in Jammu and Kashmir being arrested for facilitating the sale of SIM cards to alleged Lashkar-e-Taiba operatives.

In another case in Haryana, a private mobile company was alleged to have issued 60 connections in the name of one person based on a common identification document.