Pacific Internet launches IP telephony solution

Singapore-based communication service provider Pacific Internet Ltd today announced its entry into the voice carrier market in India with the launch of an IP telephony solution -- PacNet Vocal.

With PacNet's new vocal world number functionality, Indian businesses can establish a local presence in over 400 destinations with virtual phone numbers, a company statement said here.

Calls made to these virtual numbers are forwarded over the IP network to a designated Session-Initiated Protocol (SIP) number incurring only local call charges, it said, adding with this the companies can maintain a presence in many countries without expensive physical infrastructure costs.

PacNet Vocal is a quality voice, enterprise grade IP-Based telephone service that offers a suite of value added services tailored for a broad range of business and residential customers. 

Yahoo! IM on Reliance Mobiles

Yahoo! India has joined hands with Reliance Communications to offer Yahoo! Instant Messenger (IM) for Reliance mobile customers across India.

This alliance marks a powerful partnership to offer a rich, live IM PC experience on Reliance mobile phones.

It is learnt that with this first-of-its-kind initiative, Reliance Communications is the first telecom service provider in the world to offer Mobile IM across Java, BREW, and WAP enabled phones on a mobile operator network.

Mobile IM will allow Reliance Mobile customers to chat live with other Reliance customers and Yahoo! IM users in the world using their PCs. Customers can send instant messages, and chat online with their friends and family, using Yahoo! IM features like simultaneous multi-chat windows, presence status icons, emoticons, Yahoo! personal contact list and profile, and viewing off-line messages amongst others.

Speaking on the occasion, Mahesh Prasad, President of Applications Content and Solutions Group, Reliance Communications, said, "As an innovation leader, Reliance is bridging the digital divide by extending the Internet-rich IM experience of PCs to its mobile subscribers for the first time in India. This brings us one step closer towards the convergence of mobiles and PCs."

Talking about this alliance, George Zacharias, Managing Director of Yahoo! India, said, "We are glad to partner with Reliance for Mobile IM services in India. This unique service will add a new dimension in enhancing our user experience, and provide yet another compelling way to stay connected, instantly, and at all times."

Meanwhile, Yahoo! IM for mobile is available on all BREW, WAP, and Nokia color handsets using Java technologies. Reliance mobile customers can access Mobile IM by clicking on Reliance Mobile World > Hot n New> Yahoo! Msgr. Customers will be charged Rs 5 for each session logged, and can send and receive unlimited instant messages. 

HTIL set to ring the bell for Hutch

Hutch Telecom International Ltd (HTIL) is all set to formalise the bid process for sale of Hutch Essar, following its board meeting on January 29. So far, Hong Kong-based HTIL, which owns 67% along with its associates in Hutch Essar, has only announced it has been approached by several players expressing interest to buy India’s fourth largest mobile operator. In its announcement made on December 22, HTIL had said that “there’s no assurance that a sale may result from these approaches”.

But since then, much has transpired on Hutch Essar sale. And HTIL has now decided to take up the issue at its board meeting on Monday, according to a source close to the development. For the first time, an announcement on the sale is expected, the source added. While this week many of the potential bidders for Hutch Essar are busy networking in Davos during the World Economic Summit, by early next week, all the action may shift to Hong Kong.

As of now, the world’s largest mobile service provider, UK-based Vodafone, is still the frontrunner in the race, but competition is intense for acquiring Hutch Essar. Among the new entrants eyeing Hutch Essar is Russia’s Altima, from the Alfo group. Interestingly, Altima’s name has come up at a time when Russian President Vladimir Putin is on a visit to India. It is believed that Altima is keen on a minority stake in Hutch Essar, and may strike a venture either with Essar or the Hinduja group, which are being named as the other two potential bidders for the asset. Essar holds 33% in Hutch Essar. Essar officials did not comment on the matter.

Anil Ambani-controlled Reliance Communications is also understood to be a potential player in the race for Hutch Essar. Also in the fray are Malaysia’s Maxis and Egypt’s Orascom. Maxis officials did not respond to a question on whether the company is still in the race or not. Orascom Telecom CEO Naguib Sawiris told that a decision on buying would be taken, depending on how high the offers go. Orascom Telecom, with about 20% in HTIL, prefers to increase its stake in HTIL, rather than directly invest in Hutch Essar. Orascom aims to be among the top 10 telecom operators in the world.

Various players, including Vodafone and Reliance Communications, have already indicated their initial non-binding offers to HTIL, it is believed.

For HTIL’s 67% stake, companies have offered up to $17 billion, it is learnt. However, no formal bids have been offered so far. An HTIL official had indicated recently nothing less than $22 billion would be acceptable to the company for 100% in Hutch Essar. 

TRAI cuts roaming charges

Being in touch with people when moving out of town will become cheaper. The Telecom Regulatory Authority of India (TRAI) has slashed all roaming charges by up to 56 per cent.

This will mean that from February 15, if you are using your mobile phone while going out of town, mobile operators can only charge a maximum of Rs 2.40 per minute.

However, roaming charge floor price has been fixed at Rs 1.40 per minute and all incoming SMSes will be free of cost.

At present, service providers charge a maximum of Rs 3.99 per minute for receiving incoming calls while roaming and Rs 3.09 per minute for outgoing local calls.

Rental charges

Also, the rental for using roaming services has been done away with and incoming SMS would be free while roaming.

A surcharge of 15 per cent on air-time while roaming and a separate PSTN charge have also been done away with.

"TRAI would closely monitor market developments on roaming and if perceptible competition evolves in the market, it would revisit the issue and even consider forbearing roaming tariffs," said Nripendra Misra, Chairman, TRAI.

The new tariff would be applicable to all prepaid and postpaid GSM and CDMA mobile customers.

Impact on telcos

However, telecom companies could lose between Rs 800 to Rs 900 crore from these rate cuts and stocks like Bharti Airtel and Reliance Communications slid on the markets on Wednesday.

The impact on Bharti and Hutch, which have more roaming users is expected to be more.

A Reliance Communication spokesperson told that the impact on his company would be negligible because they have very few users on roaming.

The telecom companies might be unhappy but telecom minister Dayanidhi Maran was all praise for TRAI.

It's not all bad news for the telecom operators. TRAI has made it clear that if the operators continue to provide roaming below the ceiling set by TRAI.

The regulator might allow market forces to set the roaming tariffs and not get involved with setting these tariffs anymore.

Maran supports TRAI move on reducing roaming charges

Telecom regulator TRAI's proposal to lower roaming tariffs for mobile users today received support from the government, with Communications Minister Dayanidhi Maran expressing concern over the issue.

"I am anxiously waiting for the roaming charges to come down," Maran told reporters here on the sidelines of 'The India Digital Summit 2007'.

Telecom Regulatory Authority of India, which is facing opposition from mobile operators on reducing roaming tariffs, may enforce a regulation for the purpose.

The regulator is discussing the matter with Cellular Operators Association of India (COAI) and Association of Unified Telecom Service Providers of India (AUSPI) to reach a solution. The recommendations for the roaming tariff review are expected by the end of this month.

It has proposed to revise the existing roaming tariff by fixing a ceiling based on usage. This means there would not be any rental charges and only a composite roaming tariff on a per minute basis.

It is the first time that TRAI is taking steps to reduce roaming tariffs which are higher than the cost incurred by mobile operators to provide the facility.

Maran also said the government was looking into the spectrum policy. 

Ericsson hung up on India

Ericsson is planning a $500 million (£254 million) assault on the fast-growing Indian mobile phone market, it emerged today.

The Swedish telecoms giant said that it wanted to exploit the "phenomenal" growth in the sector - where a new customer is signing up for a handset every second of the day.

Mats Granryd, managing director of Ericsson India, said: "We will be investing $100 million annually for the next five years.

"The figure could up depending on the growth in the sector. This is growing phenomenally and I do not see an end to it."

The huge growth in India has already sparked a gold rush among leading mobile phone companies.

The market has doubled in the past year to 140 million customers - triple the amount of Indian debit or credit card holders - and is growing at a rate of 2.5 million subscribers a month.

Three months ago, Vodafone spent £840 million on a 10 per cent stake in Indian company Bharti Telecom. 

Chatting goes mobile with GSM IM

Here’s yet another platform for teenagers to expand their online chat groups and stay connected 24/7. After SMS and MMS, you can now use your mobile phone for MIM — mobile instant messaging. In other words, now one needn’t be in front of a computer to get onto Yahoo chat or Messenger or Google Talk. A mobile handset is all one needs.

The GSM industry announced the soft launch of its mobile instant messaging initiative at a seminar organised by the Cellular Operators Association of India (COAI) here on Monday.

Though MIM will by and large provide the same service that wireline services of internet messengers (IM) currently provide, MIM will go a step ahead in that it will offer a link to IM users that would permit MIM users to chat with friends who are on laptops or PCs.

To access instant messaging, a customer needs to have a GPRS (web enabled handset) and the normal GPRS charges will be applicable depending on the usage. The service is not specific to English language users but would also be available to common users in their mother tongue, Department of Telecom secretary DS Mathur said at the soft launch of the service.

Operators like BSNL, MTNL, Bharti Airtel, Hutch-Essar, Idea, Aircel, Reliance Telecom, Spice and BPL are expected to commercially launch this service in the next 3-4 weeks.

The percentage of mobile users with IM-capable phones will grow to 62% in 2010 from a mere 4% currently, COAI Technical Committee Chairman Ashok Juneja said.

The service is already available in Europe, China and Turkey and would be launched this year in Hong Kong, Pakistan, Thailand, Indonesia and Bangladesh, he added.

The MIM system has been designed and engineered by Jataayu software—an Indian software solution provider in partnership with Fastmobile, provider of integrated communications platforms and applications to the mobile industry.

Airtel and Coai fined Rs 50 lakhs for unsolicited calls, SMSes

The Delhi State Consumer Commission has imposed an exemplary fine of Rs 50 lakhs on telecom company Airtel and the Cellular Operators Association of India (Coai) for their "failure" to stop "unnerving unsolicited" calls and SMSes by telemarketing and banking companies to mobile users.

Delhi State Consumer Disputes Redressal Commission headed by Justice J D Kapoor also imposed a penalty of Rs 12.5 lakh each on ICICI and the American Express Bank for causing "immense nuisance" by making unsolicited communications such as SMSes and telemarketing calls at odd hours to cellular users.

"These damages are being imposed because of 'care-a-fig for' attitude of cellular operators and telemarketers and their having continued to indulge in making unsolicited commercial communications such as SMSes, telemarketing calls etc at odd hours.

"And thereby causing immense nuisance inspite of the act they were issued notice by the Supreme Court in a PIL in 2003 and orders passed by this commission from time to time for not indulging in such practices," said Justice Kapoor. 

Tatas may hive off tele tower biz

The Tata group is planning to hive off its telecom tower business into a separate company to monetise assets valued at over Rs 1,000 crore. Tata Teleservices (TTSL) is in talks with private equity firms, tower companies as well as some operators to hive off its 5,600 towers across India, CEO Darryl Green told ET. TTSL is looking at setting up a tower venture where PE firms or tower companies could have a stake.

TTSL is also talking to other telecom companies keen to come together for hiving off their towers. “Given the right deal, we have no desire to own (telecom) infrastructure. We are in active discussion with various players. If we just had to monetise, it would be easy. But we are trying to find the best way to structure it,” he said.

He said the company’s towers were robust and could accommodate three to four operators. “They are highly desirable. We feel it is important to sell them to a consortium which abides by rules and plays fairly,” he said, adding that the company was keen to achieve what the DoT has been saying about sharing telecom resources.

Asked about the time frame, he said, “It’s a good possibility this year.” Already, Reliance Communications (RCL) has said it would transfer its telecom towers to a separate company, TowerCo. Some private equity firms, including Blackstone, are said to be in talks to pick up stake in this company.

Pressed with managing vast subscriber base and roll out of newer value-added services, operators are increasingly opting for an asset-light model, which reduces the strain on the balance sheet. 

Anil toes Sarin, works ministries

It was the turn of Reliance Communications chairman Anil Ambani to repeat what Vodafone CEO Arun Sarin had done just a day before.

Ambani spent most of Thursday in the capital, meeting finance minister P Chidambaram, communications minister Dayanidhi Maran, and department of the telecommunications (DoT) secretary D S Mathur.

This is even as the company began due-diligence of Hutch Essar on Thursday.

It is believed that Ambani’s meetings with the government representatives were not planned much in advance.

The buzz was that Ambani may have discussed the issue of the proposed Hutch Essar deal with the ministers and the DoT secretary, though the official line was that “he made courtesy calls”.

Just a day earlier, Vodafone’s Sarin had a back-to-back schedule with three ministers — Chidambaram and Maran, and commerce & industry minister Kamal Nath on Wednesday.

Even Essar chairman Shashi Ruia had separately met Chidambaram and Maran on Wednesday.

Vodafone was the first one to start the due diligence process earlier this week, ahead of placing a formal bid for acquiring Hutch Essar, the fourth largest telecom operation in the country.

Essar, which holds 33% in Hutch Essar, is learnt to have begun due-diligence on Wednesday. The Hinduja group is expected to do follow suit early next week.

Although there’s no formal bidding process, all interested players are expected to place their formal bids for Hutch Essar within weeks, a source said. 

Idea Cellular plans Rs 4000 cr capex

The Aditya Birla group company Idea Cellular has lined up Rs 4,000 crore capital expenditure in the current financial year to expand its network coverage in the existing circles as well as enter new circles.

“While the company has already filed a red herring prospectus with the Securities Exchange Board of India for its initial public offering to mop up Rs 2,500 crore. It will raise the balance through internal accruals,” said Managing Director Sanjeev Aga.

The wireless telephony company had already obtained licences to roll out its services in Mumbai and Bihar circles by paying licence fees of Rs 204 crore and Rs 10 crore respectively.

“In September last year, we launched our services in three new circles – east UP, Rajasthan and Himachal Pradesh. With the latest additions, the number of circles we are operating in will go up to 13,” Aga said.

Besides, the company has already applied to the Department of Telecom for licences to kick off its services in Karnataka, Punjab, Tamil Nadu, West Bengal, Assam, Orissa and Jammu & Kashmir.

“The government will release some fresh spectrum in February-March, and we expect to enter a few more circles with this,” company sources said.

Aga said the company would adopt a two-pronged strategy in bringing subscribers within its fold in Bihar and Mumbai. He said at about 6-7 per cent the cellular penetration in Bihar was half the national average of 14 per cent.

“So there is an unpenetrated market in the state, which gives us great scope for growth,” he added. In Mumbai, the teledensity is about 50 per cent, which is almost four times the national average and is estimated to grow beyond 100 per cent over a few years.

“We are thinking of addressing this market with a combination of efficiency and innovation,” Aga said.

Idea is going to offer international roaming services to its pre-paid customers over three-four months.

Besides, it plans to provide its subscribers with a value-added service which will enable them to download favourite ring tones from the mobiles of the persons they are calling. This they can do by pressing one particular number in their handsets.

“We are one of the pioneers in introducing innovative services and were the first to introduce GPRS service in Delhi. Innovation and efficiency will continue to drive our future growth,” Aga said.

Idea has obtained the NLD (national long distance licence) and is also planning to apply for the international long distance licence. 

Hutch war gains momentum, CEO Sarin meets Chidambaram

The bidding war over Hutchison Essar acquired fresh momentum on Wednesday with the visit of Arun Sarin the CEO of Vodafone to India.

Vodafone leads the pack of those keen to pick up Hutchison Telecommunications International Ltd's (HTIL) 67 per cent stake in Hutch Essar.

Sarin held meetings with Union Finance Minister P Chidambaram, Minister for Commerce and Industry Kamal Nath and Communications Minister Dayanidhi Maran, ostensibly to gauge the attitude of the Indian government to its effort to enhance its presence in India.

Sarin is understood to have told all the three leaders that Vodafone was ready to join hands with Essar to pick up the stake in Hutch Essar.

During his meeting with Commerce Minister Kamal Nath, the chief of European telecom major is understood to have discussed Foreign Direct Investment (FDI) policy in telecom sector, besides regulatory issues as well.

Sources who were present at the meeting said that the Minister told Sarin that the deal should be gone about in a transparent manner in accordance with best commercial practices and in the best interest of all stakeholders.

Speaking to the reporters after the meeting, Sarin said the talks were “fruitful" and that "formal bidding was still a few weeks away."

When quizzed about the bid being made by the end of January, he said, "Later than that." He added he found no ambiguity in India's FDI regulations.

Sarin later in the evening met Maran and informed him on the benefits that Vodafone offers to its customers worldwide. He is also understood to have discussed the possible sale of 10 per cent stake Vodafone currently holds in Bharti, since the licence condition stipulate that no single promoter can hold more than 10 per cent stake in the same circle.

About 30 minutes prior to Sarin’s meeting with Maran, Sunil Bharti Mittal chairman and managing director of Bharti Enterprises met the Communications Minister. When asked about the discussions with Maran, Mittal told Hindustan Times, “I cannot comment on the discussions.”

Earlier in the day, Essar vice-chairman Ravi Ruia, met Finance Minister P Chidambaram separately. Essar is also bid for 67 per cent stake of HTIL in Hutch Essar Ltd (HEL),

Communications Minister Dayanidhi Maran told agencies: "We want good (foreign telecom) players to come to India." 

5 bankers to vet Hutch Essar books

Essar Group’s bankers, including Citibank and Morgan Stanley, are likely to start examining tomorrow the books of Hutchison Essar Ltd in the run-up to Indian conglomerate’s bid for Hutchison Telecom’s 67 per cent stake in the joint venture company.

The five bankers, Citibank, Morgan Stanley, Standard Chartered, Merill Lynch and Lehman Brothers, would initiate “confirmatory diligence” for Hutch Essar Ltd in a day or two, sources familiar with the development said.

These bankers have already extended funding pledges to the tune of $25 billion to Essar and would now study the books of HEL to get a final picture of its accounts, the sources said.

When contacted, a spokesperson of Essar, which already has three directors on HEL’s Board, declined to comment.

Essar chairman Mr Shashi Ruia had yesterday announced the group’s interest in buying out Hutchison Telecom’s stake from the joint venture. Mr Ruia had said that his group, which has 33 per cent stake in the JV, did not need the due diligence of HEL, as it was their “own company”.

Orascom

Orascom has also said that it has not pulled out of race for Hutch Essar and is very much interested in it. But it is yet to make a firm bid for Hutch Essar.

The Egyptian government has written to the Indian government, seeking clarification on the government’s stand on the same. The company also confirmed a strong presence on HTIL Board.

Meanwhile Vodafone will have to partner with an Indian company, even if a dormant front company, if it succeeds in getting majority control of Hutch Essar, government officials said.

Senior department of telecom officials said under the stipulated regulations, any foreign company such as Vodafone cannot be allowed to keep 74 per cent stake and offer the balance 26 per cent to the Indian public. This is because nobody can keep track of when the Indian public sells that share to foreign investors in secondary market transactions.

Mandelson meets Nath

The commerce and industry minister, Mr Kamal Nath, today confirmed the EU trade commissioner, Mr Peter Mandelson, spoke to him on the possibility of a bid by British mobile phone giant Vodafone to acquire Hutchison stakes in Hutch Essar.

“Mr Mandelson wanted to understand the regulations in India,” Mr Nath said on the sidelines of the Ficci AGM. 

EU trade chief talks to Kamal Nath on Vodafone

The European Union on Monday pitched for British mobile giant Vodafone, which has started examining the books of Hutchison Essar as it prepares to bid for acquiring India's fourth-largest mobile operator.

EU Trade Commissioner Peter Madelson has spoken to Commerce and Industry Minister Kamal Nath and took up the issue of Vodafone's interest to buy out Hutchison's 67 stake in Hutch Essar, official sources said.

Nath is understood to have informed Mandelson about India's FDI policy on telecom allowing 74 per cent foreign shareholding, on which the government is yet to come out with final guidelines.

EU's support for Vodafone comes within days of the UK-based firm's representatives meeting senior officials of Department of Telecom seeking clarity on FDI policies.

However, Vodafone's possible bid for HEL does not involve any regulatory concern since the existing policies do not bar foreign investment in the telecom sector except on security related issues.

Mandelson's intervention is seen as a reversal of roles with Nath, who had supported NRI steel tycoon L N Mittal's bid for acquiring Mittal Steel's nearest rival Arcelor. 

Will Essar go to court over RoFR tangle?

Will the Essar group move the court on the controversial right of first refusal (RoFR) issue? While the group is keeping mum on the issue, sources say there are enough reasons to believe that it may hit the court in its battle with joint venture partner Hutchison.

The Essar group has roped in Zia Mody’s AZB & Partners, one of India’s top law firms specialising in mergers and acquisitions, to represent it in case the Ruias’ RoFR is infringed, sources close to the development told ET.

At the same time, It is learnt that one more round of discussions is slated to take place between Hutchison and Essar this week in Hong Kong to resolve their differences and prevent the matter from going to court.

Meanwhile, the consortium of banks that has decided to lend money to the Essar group has also hired J Sagar & Associates to work out the terms and conditions for the loan. The Essar group has reportedly tied up $20 billion for funding the acquisition of Hutchison Telecommunications International (HTIL)’s 67% stake in HEL.

“In the case of a leveraged buyout of HEL, the lawyers at J Sagar will assure that all the necessary conditions are fulfilled. Such big and complicated transactions require a lot of legal back-up. Companies and banks have to be prepared for legal action by any side any time,” sources said.

When contacted by ET, an Essar spokesperson said: “We would not like to comment.” Despite hectic developments, any legal move is unlikely in the next two or three weeks, sources said.
“AZB has been hired to prepare any possible case on RoFR. But a petition will be filed only if an interested party (say RCL or Vodafone) makes an offer for buying the 67% stake of Hutchison and the Ruias are not asked to match the bid,” legal experts said.

While UK giant Vodafone and RCL are conducting due diligence for HEL, there is no reason for Essar to move the court at this stage. “The interested parties will submit their bids only by the end of this month or early February. At that stage, if the Ruias are not allowed to bid, then the Bombay HC will be moved,” sources added.

According to experts, the RoFR will come into play only after final bids for HEL (being valued at upwards of $20 billion) are submitted. The two JV partners differ over the interpretation of RoFR. While the Ruias claim that it is applicable in case of sale to any party, HTIL said it comes into play only if the sale is made to RCL, the Tatas or Bharti Airtel.

Vodafone officials meet Trai chief Misra

Senior officials of Vodafone, widely seen as frontrunners to buy out Hong Kong tycoon Li Ka-shing’s holdings in Hutchison Essar, last week called on Nripendra Misra, chairman of the Telecom Regulatory Authority of India (Trai), the telecom regulator. They met Misra after meeting department of telecom (DoT) officials.

While the grapevine obviously relates this event to Vodafone’s bid to buy India’s fourth largest mobile operator, Misra himself denied that his meeting with Vodafone’s Mathew Kirk and Neil Gough had anything to do with Hutchison Essar. According to him, the officials were here to seek an extension of the deadline for submitting their views on the resale of international private leased circuits (IPLC), on which Trai had issued a consultation paper last month.
The deadline for soliciting views, originally set for January 5, has been extended to January 15. As a telecom player, Vodafone, no doubt, would have an interest in IPLCs, but observers doubt if you need to send two officials personally just to seek an extension of the deadline for submitting views. It could have been done just as easily over the phone.

On the other hand, if Vodafone is on the verge of buying Hutch, a preliminary meeting with Trai on regulatory hurdles makes sense.

Trai’s recommendations on intra-circle mergers and acquisitions, issued in January, 2004, states that “all telecom mergers are to be notified to Trai” and the “merged entity should obtain the approval of the licensor (DoT)”. The Trai recommendation also says that it has “the right to intervene and/or inquire into expected or completed mergers”.

DoT had accepted most of the recommendations on mergers and acquisitions (M&A), but with some modifications. And the subsequent government notification on the issue has been silent on Trai’s role in any telecom M&A.

According to DoT rules, a merger of licences is permitted subject to the condition that there are at least three operators in a service area. Also, prior approval of DoT will be necessary for an M&A.

DoT rules say that monopoly will not be permitted in any circle - and monopoly is defined as 67% or more in terms of marketshare in any telecom circle. The merged entity shall also be entitled to the total amount of spectrum held by the merging entities, subject to the condition that after the merger the amount of spectrum cannot exceed 15 MHz per operator per service area for metros and category A circles, and 12.4 MHz for B and C circles each.

Significantly, the DoT guidelines state that “while granting permission for merger of licences, the licensor may suitably amend/relax/waive the conditions in the respective licences relating to the clause on holding of `substantial equity’ in another operator.

As per the licence, no single company, either directly or through its associates, should have substantial equity in more than one licensee company in the same service area.
The substantial equity refers to more than 10% equity holding.

Idea Cellular gets nod to raise foreign holding to 74%

Ahead of its proposed public issue to raise Rs 2,500 crore, A V Birla Group telecom company Idea Cellular is understood to have got government clearance for foreign investment of up to 74 per cent equity.

The proposal by the company, in which foreign investment stands at 47.55 at present, is believed to have been cleared by foreign investment promotion board, allowing it to enhance the foreign holding to 74 per cent.

As per norm, foreign direct investment in telecom companies up to 49 per cent is on automatic route and FIPB approval is be required if the foreign investment has a bearing on the overall ceiling of 74 per cent, it said.

This comes in the days after idea cellular got licences for Mumbai and Bihar.

The company is expected to get the approval from SEBI for its draft prospectus in the next 10 days and is likely to hit the market in the second week of February. The company has got two LoIS for Mumbai and Bihar.

As per as the new foreign investment regulation in the sector, telecom companies are required to declare their composite foreign holdings. The government has also allowed foreign institutional investors and overseas venture capital funds to invest in the Aditya Birla Group's telecom venture's upcoming Rs 2,500-crore initial public offer.

Idea had filed a red herring prospectus with the Securities and Exchange Board of India (SEBI) for the entirely book-built IPO. The Aditya Birla Group has already divested nearly a 33 per cent stake to a handful of investors -providence equity partners of the US, India's Chryscapital, the UK's TA Associates and GLG Partners and Citigroup.

Vodafone vows not to overpay to capture Hutch

Mobile phone ginat Vodafone, which is in the race for buying the 67 percent stake in India's fourth-biggest mobile player Hutchison Essar, while being pitted against Reliance in the 20 billion dollars bid battle, has said that it won't overpay.

The statement is a bid to pacify the analysts who have expressed their concern that the company might overpay to go for buying three-fourth stake in Hutch.

Although funding is not regarded as an issue for Vodafone, which is expected to pay all-cash if successful, analysts are concerned that the group might be dragged into paying a hefty premium for the buyout, reported The Times.

The mobile operator, which is facing mounting investor concern about over-exuberance in a heated race, vowed not to breach the "strict financial criteria" recently introduced by Arun its chief executive Sarin.

Its defence came as the battle for the Indian operator intensified with an alliance of four of the world's biggest buyout groups behind Reliance, one of Vodafone's rivals. Apax, KKR, Carlyle and Blackstone are understood to be close to joining forces to back Reliance, India's second-largest mobile operator, in its efforts to secure Hutchison Essar.

"Any acquisition would fit with our published financial mergers and acquisition criteria," the paper quoted a Vodafone spokesman as saying.

As the battle for Hutchison's 67 per cent stake in the venture has hotted up and more deep-pocketed rivals such as the billionaire Hinduja brothers have entered the fray so the price for the asset has soared. Analysts now put an enterprise value on the entire group, including debt, of about 20 billion dollars. Both Vodafone and Essar - the 33 per cent joint venture holder - have tabled formal preliminary offers.

In a bid to pacify the analysts, Sarin had recently made public the guidelines about the group's share-price performance under him.

Richard Marwood, a fund manager at AXA, which holds just under 1 per cent of the stock, said that although it was reasonable for Vodafone to examine such opportunities, he did not want it to return to the strategic, footprint-building deals of its old days. "We do not want them to pursue it at all costs. If it cannot make the numbers stack up, then it should walk away," he said.
Analysts at JPMorgan said preliminary calculations suggested that Vodafone's strict mergers and acquisitions criteria "might be stretched". Their comments followed a warning earlier in the week from State Street, a key investor in Vodafone.

Sarin, who is leading the Vodafone negotiations, had his reputation seriously damaged by a similar frenzied auction in 2004 - the 41 billion dollars AT&T Wireless battle in the US. Vodafone's bid failed and Sarin was criticised for having a lack of communication with the City.

Hutch Essar more valuable than Hutchison & Essar

It’s a queer situation. Hutchison Telecom International (HTIL) has pegged the floor price of its 67% stake in Hutch Essar at $14 billion. However, its total market capitalisation at the Hong Kong stock exchange is $11.5 billion. This creates an unusual situation, where the perceived value of a company’s asset is more than its total market cap.

And this, despite the fact that the HTIL stock has got a significant leg-up since news of the possible sell-out broke out. In the past month, the HTIL stock has risen nearly 10%.

The other joint venture partner, Essar, too is benefitting significantly as a result of the bidding war. While the total market capitalisation of the listed Essar group companies on the Indian bourses is Rs 12,000 crore, the Essar group’s holding in Hutch Essar of around 33% has been pegged at $7 billion, or Rs 32,000 crore.

Just what is causing this anomaly in terms of valuation? While some bidders say the fair value of Hutch Essar is around $16-17 billion, some analysts provide justification for the high valuations. They reason that the sale is not of assets but the controlling stake in a running company. The price being demanded takes that into account and adds the possible earnings over the next couple of years to the total price. In the case of Hutch Essar, the price is said to be close to 8 times EBITDA. This implies the sellers want eight years’ earnings as premium to sell their stake in the company.

Another reason given for the high valuation is the relatively better position of the company in terms of average revenue per user (ARPU). ARPU is the yardstick by which the performance of any telecom player is measured and Hutch seems to be doing better than its competitors in this respect. Some analysts also say that HTIL’s market cap of $11.5 billion might not have included the full value of its stake in Hutch Essar in the past due to limited information on the valuation of the telecom company. The underperformer outlook on HTIL could also have resulted in depressed share prices.

Vodafone officials meet DoT Secy, talk FDI

British telecom giant Vodafone's representatives today held talks with senior government officials on the latest position on FDI norms in the telecom sector.

Senior Vodafone officials met Telecom Secretary Dinesh Mathur and made a presentation about the company's plans in the country, official sources said, but denied that issues related to acquisition of Hutch Essar were discussed.

Vodafone, which has about 10% stake in Bharti Airtel, wanted to know the latest position of the government on foreign investment.

"The topic of Hutch Essar was not even touched. They enquired about the recently-announced vision statement of the ministry, and wanted to know the strategy of implementation," the sources said.

However, the meeting assumes significance in the backdrop of Vodafone's interest in acquiring Hutch-Essar, and the delay in finalising the FDI guidelines that will clarify the status of foreign players.

The government has extended the date for meeting the revised FDI norms till April 2, 2007 to reach a consensus with intelligence agencies on the crucial remote access issue although there has been a broad approval for allowing foreign CEOs and CFOs in telecom companies.

Spice Telecom plans Rs 600cr IPO

The board of directors of Spice Telecom has approved plans for the company to go public during March-April 2007. The Rs 1,000 crore firm, which operates mobile services in Karnataka and Punjab, is expected to raise around Rs 600 crore by offloading 15-20%.

Telecom Malaysia, which holds 49% in the company, paid around Rs 800 crore when it acquired the stake during early 2006, valuing this firm at around Rs 1,600 crore.

Spice Telecom has around 2.5 million users and has a debt of close to Rs 1,200 crore.

The company plans to use the fresh funds for starting mobile services in new circles and start national long distance and international long distance services with the backing of Telecom Malaysia.

MCorp Global, the holding company of Spice Telecom, also announced that it has entered into a joint venture with Spanco Telesystems to offer enquiry services to Indian Railways.

Bhupendra Kumar Modi, chairman, MCorp Global said in Bangalore: "We should be rolling out this service by March of this year. Nearly 40 crore Indians travel by train on an annual basis and the price point we are offering is a compelling proposition for them to get connected."

Using this as the platform, Mcorp Global plans to offer mobile phones at around Rs 1,000 for rail passengers with valid tickets.

IOL Broadband ties up with BSNL

IOL Broadband today said it has tied up with BSNL to roll out its IPTV service.

The company has started trials of its IPTV service launch on the BSNL Broadband network in Bangalore, it informed the Bombay Stock Exchange.

BSNL has over seven lakh broadband ADSL subscribers all over India, it said.

IOL Broadband has also signed a revenue sharing agreement for its IPTV Service with Anytime - a consortium of major Hollywood Studios such as Disney, FOX, Warner, Universal - which will allow its IPTV subscribers to view the latest Hollywood movies without commercial breaks and months before Satellite TV Broadcasts, it added.

Reliance Comm, Verizon prepare for Hutch war

With the battlelines now drawn for the Hutch Essar deal, Reliance Communications seems to be preparing a warchest.

The Reliance Communications board will meet on the 10th of this month to mull raising long term resources from the international market. It will consider raising funds via ECB/FCCB issue. It is in talks with PE players as well.

Anil Ambani had made a statement saying that many of the top ten PE players have pledged their support.

Reliance Communications has cash reserves of USD 1.7 billion. It has raised a debt of USD 1 billion for general corporate purposes.

Hutch Essar may soon have a US bidder joining in the fray, reports wire agency PTI.

The report says US telecom giant Verizon may place a bid for control of India's fourth-largest mobile operator. The US firm has, however, refused to comment on any kind of speculation.

The report says a Verizon spokesperson also declined to comment on queries related to whether a potential bid would be in partnership with its US partner Vodafone, or a solo offer.

Also sources say Hutch and Ruia discussions continued today in Hong Kong. Hutch has not accepted Ruia's offer.

Singapore Telecommunications wants Vodafone off Airtel’s Board

Singapore Telecommunications has a 30 percent stake in Bharti Airtel which is the largest mobile service provider in the country.

Vodafone also has a minor stake in the company. However, the recent reports have said that Vodafone is interested in getting a stake in rivals Hutch.

SingTel as a result is rumored to have said that they want representatives of Vodafone off the board of mobile phone operator Bharti Airtel.

This was reported by Times of India newspaper which cited undisclosed sources.

A Bharti Airtel spokesman has declined to comment on these rumors saying: “As a matter of policy we do not comment on market speculation or discussion between shareholders.”

GSM, CDMA oprs, BSNL oppose ceiling on roaming tariff

Telecom regulator TRAI's move to fix a new ceiling on roaming tariffs is being unilaterally opposed by State-run BSNL as well as private GSM and CDMA operators, as they want market forces to determine the rates.

Roaming tariff should be under forbearance and market forces should determine the tariff, officials of BSNL, GSM industry body COAI and CDMA operators association AUSPI said ahead of TRAI's open house tomorrow to review roaming rates.

In fact, there should not be any ceiling on incoming or outgoing national calls. There is forbearance in mobile tariff as there is enough competition in the mobile service segment, the same should be applied to roaming services as well, a BSNL official said.

While BSNL's is buttressing its argument, saying that roaming service is in itself not a 'market', but is a mere mechanism to connect a customer who is out of the home network, the CDMA and GSM operators hold the view that TRAI's interference on micro-management of tariffs is unnecessary on this front.

Cellular Operators Association of India (COAI) said the tariff offered under different packages for different services like rental, local call charges, NLD, roaming and SMS charges are decided based on the overall ARPU (average revenue per user) under each tariff package.

The charges for each individual service under a package are not necessarily cost based. While some of the services may be offered below cost so as to attract the specific class of users, tariff for some of the other services under the package may be above cost, COAI said.

Revenues from roaming account for only around 10 per cent of net service revenues. So any exercise to review roaming tariffs must be done in conjunction with a review of the overall cost and tariff structure of the industry, it added.

The operators are charging well below the prescribed ceiling. As against a ceiling of Rs 100 per month, the operators are charging Rs 50 from their subscribers and in return, offering them much lower charges on roaming in their own network, COAI said.

Any micro management of tariffs will significantly reduce the flexibility of operators in offering the overall most affordable services to the various customer segments.

"We are not in agreement with the Authority's proposal to lay down a roaming tariff structure as in this era of intense competition, it is neither necessary nor desirable," a COAI official said.