NEW DELHI: Just about 40 days in the saddle and telecom minister, A Raja is already set to face the heat. BSNL's over $6 billion order to procure 45.5 million GSM lines has acquired a fresh and explosive twist, with BSNL sources denying any move to renegotiate the bid price with Ericsson.
Confirming this, Ericsson officials said, "We are waiting for BSNL to send us the advance purchase order". However, Raja's first announcement as Cabinet minister was that he wanted BSNL to renegotiate the price of its tender from the approved price of $107/line down to $90/line as this would save the exchequer Rs 1,800 crore.
This is despite the fact that the second lowest bidder, Nokia, had reportedly quoted $160/line. The BSNL tender is designed to allow 60% of the contract to the lowest bidder, and the remaining 40% to the second lowest bidder.
According to BSNL sources, the file was sent to Raja for final clearance on May 18, but is yet to be released by him.
The tendering process has already taken over two years with no sense of closure in sight. BSNL sources say a fresh tendering process will result in an irreversible decline in BSNL's status as a mobile operator, with losses of over Rs 7,000 crore, far outweighing Raja's projected Rs 1,800 crore saving.
Here's their math: If the new tender takes two years, BSNL loses 43 million subscribers, at least 12% erosion of market share and Rs 7,000 crore in revenues, considering an average loss of 1.8 million subscribers every month or Rs 300 crore in revenues/month.
The calculations are based on March and May '07 numbers, before and after capacity constraints kicked in. In March '07, when it was not constrained by capacity, BSNL added 2 million GSM lines. In May '07, it just about added 0.24 million subscribers for want of equipment.
That means every month, saturated networks claim 1.8 million subscribers. Similarly, in March 2007, BSNL had 29.2 million subscribers and a 22.36% market share, which dropped to 27.9 million subscribers and a 21.43% share in May 2007, or a loss of 1% every 2 months.
Agrees Nilotopal Basu, prominent leader of the Left parties, "point of presence is the most important parameter in the telecom business. Unless the equipment is procured quickly, the damage will be unprecedented, one that may not allow BSNL the luxury of a quick recovery".
G L Jogi, general secretary of Sanchar Nigam Executives Association points out that in May alone, Hutch Vodafone added 1.5 million new subscribers against BSNLs 0.24 million. Hutch had a total base of over 29.2 million subscribers in May '07 against BSNLs reasonably static 27.9 million. Not surprisingly, the unions threaten nationwide action unless there is immediate resolution.
BSNL (earlier DoT) is India's largest fixed-line operator with over 40 million fixed lines. However, it is quickly losing its premiere status as the second-largest GSM operator after Bharti. It now holds the third position in the GSM space after Hutch Vodafone and overall fourth position in the cellular industry behind Reliance (see chart).
BSNL's order — one of the largest global GSM tenders so far — has been jinxed from the start. However, the story took another unexpected turn when telecom minister, Dayanidhi Maran was unceremoniously removed just 40 days ago, to be replaced by A Raja, also of the DMK.
Earlier, Motorola, which was rejected on technical grounds, moved the Delhi High Court in October 2006. In April 2007, Motorola withdrew its petition, finally removing the barriers for the award of contract to Ericsson and Nokia Siemens.
Wednesday, June 27, 2007
Maxis won't give Saudi Tele free ticket
NEW DELHI: Saudi Telecom's purchase of 25% equity stake in Malaysian telecom company Maxis for $3 billion may not give it automatic access to India through Aircel Cellular, which is 74% owned by Maxis Communications. Saudi Telecom may need to obtain clearance from the Foreign Investment Promotion Board (FIPB) before it can get a corresponding stake in Aircel Cellular.
Under the revised provisions of the foreign direct investment (FDI) policy for critical infrastructure sectors, which include telecom, which is currently being finalised, if a global M&A results in a change of control, management or broad representation in an Indian telecom company, fresh clearance from the FIPB will be necessary.
Additionally, the new FDI policy also proposes that such a deal would require a separate security clearance from the Indian government. The security agencies have said that this rule should apply to 'critical infrastructure sectors' such as telecom.
This issue was widely debated when the government recently considered M&A issues related to Hutchison-Essar Ltd (HEL). The Prime Minister's Office had called for a review of FDI guidelines in all key sectors after the National Security Adviser (NSA) objected to Egyptian service provider Orascom’s bid to obtain an indirect holding in Hutchison-Essar (HEL) through purchase of an equity stake in Hutchison International. The objections raised by the NSA also thwarted Orascom’s attempts to get a board representation in HEL (now Vodafone-Essar).
Mandatory need for FIPB clearance in the case of global M&A deals affecting Indian telecom companies was proposed by the security agencies during the discussions related to HEL. The FIPB, while clearing Vodafone’s acquisition of a 52% stake in HEL, asked the government to rework FDI guidelines to plug the loopholes.
Clear norms for this are expected when the government carries out its proposed review of the FDI policy next month.
Maxis is privately-owned by Malaysian tycoon Ananda Krishnan’s firm Binariang.
Saudi Telecom, which recently said that it aimed to get 10% its revenues from external sources by 2010, has already chalked out big plans for India -- the world’s fastest growing telecom market.
“Saudi Telecom and Binariang's other shareholder will together underwrite a $900-million loan to expand in India where Maxis operates through its Aircel unit,” Saudi Telecom chairman Mohammed al-Jasser was quoted as saying in a statement carried by international wire agencies. "This transaction represents an important step for the company's drive to become an influential player in the global telecom sector," said the statement.
Similarly, Binariang chairman Raja Arshad Raja Uda in a statement said: "This partnership with Saudi Telecom provides the opportunity to link Maxis, and its operations in Malaysia, India and Indonesia, to one of the largest and most reputable telecommunications operators in the Middle East in a mutually beneficial way."
Saudi Telecom's investment in Maxis will boost the Malaysian company's plans for India. Aircel, India's fifth largest GSM player, stands to gain as Saudi Telecom will infuse the much-needed capital to fund the expansion plans. More so, considering that Maxis had recently said that it would need an additional $3 billion to expand operations in India.
Aircel, with just under 5 million subscribers, holds licences to offer telecom services in nine telecom circles in the country and aims to be a pan-Indian player and expand its presence to all 23 circles by the first half of 2009. As the first step, the company recently launched services in both Himachal Pradesh and Bihar. Aircel was recently been granted both the national and international long-distance licences by the department of telecom (DOT).
Maxis Communications' group chief executive officer Datuk Jamaludin Ibrahim had recently told ET that the company would invest over Rs 2,000 crore in its Indian operations in 2007-08, while adding that it had set a target of reaching 8 million subscribers during this period. In the last fiscal, Maxis had invested about Rs 2,700 crore in Aircel, of which Rs 1,350 crore was paid to the department of telecom (DoT) towards entry fee for licences in 14 new circles in the country, while the remaining was spent on network expansion.
Under the revised provisions of the foreign direct investment (FDI) policy for critical infrastructure sectors, which include telecom, which is currently being finalised, if a global M&A results in a change of control, management or broad representation in an Indian telecom company, fresh clearance from the FIPB will be necessary.
Additionally, the new FDI policy also proposes that such a deal would require a separate security clearance from the Indian government. The security agencies have said that this rule should apply to 'critical infrastructure sectors' such as telecom.
This issue was widely debated when the government recently considered M&A issues related to Hutchison-Essar Ltd (HEL). The Prime Minister's Office had called for a review of FDI guidelines in all key sectors after the National Security Adviser (NSA) objected to Egyptian service provider Orascom’s bid to obtain an indirect holding in Hutchison-Essar (HEL) through purchase of an equity stake in Hutchison International. The objections raised by the NSA also thwarted Orascom’s attempts to get a board representation in HEL (now Vodafone-Essar).
Mandatory need for FIPB clearance in the case of global M&A deals affecting Indian telecom companies was proposed by the security agencies during the discussions related to HEL. The FIPB, while clearing Vodafone’s acquisition of a 52% stake in HEL, asked the government to rework FDI guidelines to plug the loopholes.
Clear norms for this are expected when the government carries out its proposed review of the FDI policy next month.
Maxis is privately-owned by Malaysian tycoon Ananda Krishnan’s firm Binariang.
Saudi Telecom, which recently said that it aimed to get 10% its revenues from external sources by 2010, has already chalked out big plans for India -- the world’s fastest growing telecom market.
“Saudi Telecom and Binariang's other shareholder will together underwrite a $900-million loan to expand in India where Maxis operates through its Aircel unit,” Saudi Telecom chairman Mohammed al-Jasser was quoted as saying in a statement carried by international wire agencies. "This transaction represents an important step for the company's drive to become an influential player in the global telecom sector," said the statement.
Similarly, Binariang chairman Raja Arshad Raja Uda in a statement said: "This partnership with Saudi Telecom provides the opportunity to link Maxis, and its operations in Malaysia, India and Indonesia, to one of the largest and most reputable telecommunications operators in the Middle East in a mutually beneficial way."
Saudi Telecom's investment in Maxis will boost the Malaysian company's plans for India. Aircel, India's fifth largest GSM player, stands to gain as Saudi Telecom will infuse the much-needed capital to fund the expansion plans. More so, considering that Maxis had recently said that it would need an additional $3 billion to expand operations in India.
Aircel, with just under 5 million subscribers, holds licences to offer telecom services in nine telecom circles in the country and aims to be a pan-Indian player and expand its presence to all 23 circles by the first half of 2009. As the first step, the company recently launched services in both Himachal Pradesh and Bihar. Aircel was recently been granted both the national and international long-distance licences by the department of telecom (DOT).
Maxis Communications' group chief executive officer Datuk Jamaludin Ibrahim had recently told ET that the company would invest over Rs 2,000 crore in its Indian operations in 2007-08, while adding that it had set a target of reaching 8 million subscribers during this period. In the last fiscal, Maxis had invested about Rs 2,700 crore in Aircel, of which Rs 1,350 crore was paid to the department of telecom (DoT) towards entry fee for licences in 14 new circles in the country, while the remaining was spent on network expansion.
ABN-Amro planning to double Gulf staff
DUBAI: ABN-Amro plans to double its private banking staff in the Gulf region in the next two years to tap a market growing over 20 per cent a year, executives at the bank said yesterday.
It is also expanding in India, China, and Indonesia in part to tap growing Middle Eastern money flowing to Asia as Arab investors diversify their portfolios and seek higher returns.
"We are seeing a significant shift toward investing in Asia," said Barend Janssens, head of private banking for Asia.
"This is due to the growing wealth of the Indian and Pakistani expatriate community in the Gulf and the religious link with Indonesia and Malaysia."
Wealth in the Middle East among those with more than $1 million of liquid assets would grow to between $2.5 and $3.5 trillion at the end of 2007, from $1.75 trillion at the end of 2005, Janssens said. The market was growing at more than 20pc a year, compared to about 15pc a year in Asia, helped by high oil prices and a buoyant global economy, he said.
Arabs traditionally invested their wealth in the US and Europe but were increasingly targeting Chinese IPOs, Indian equity and real estate markets, and direct investments in Malaysian or Indonesian companies, he said.
A crash in Gulf equity markets last year also encouraged Arab investors to boost investments in Asia, Janssens said.
It is also expanding in India, China, and Indonesia in part to tap growing Middle Eastern money flowing to Asia as Arab investors diversify their portfolios and seek higher returns.
"We are seeing a significant shift toward investing in Asia," said Barend Janssens, head of private banking for Asia.
"This is due to the growing wealth of the Indian and Pakistani expatriate community in the Gulf and the religious link with Indonesia and Malaysia."
Wealth in the Middle East among those with more than $1 million of liquid assets would grow to between $2.5 and $3.5 trillion at the end of 2007, from $1.75 trillion at the end of 2005, Janssens said. The market was growing at more than 20pc a year, compared to about 15pc a year in Asia, helped by high oil prices and a buoyant global economy, he said.
Arabs traditionally invested their wealth in the US and Europe but were increasingly targeting Chinese IPOs, Indian equity and real estate markets, and direct investments in Malaysian or Indonesian companies, he said.
A crash in Gulf equity markets last year also encouraged Arab investors to boost investments in Asia, Janssens said.
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