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Mobile Subscribers Yearwise comparision

New Players - Six-pack competition

January 15, 2010
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Over the past 10 years, the Indian teleom sector has emerged as a lucrative investment destination for operators, vendors and manufacturers alike.

This was evident from the number of applicants queuing up outside the Department of Telecommunications (DoT) for telecom licences to operate in the country in 2007. As many as 573 applications had been submitted, though only six new players were finally awarded unified access service licences.

Initially, all the six entrants –­ Datacom, Loop Telecom, Sistema Shyam TeleServices Limited (SSTL), STel, Etisalat DB (earlier Swan Telecom) and Unitech Wireless –­ announced mega plans and strategies to roll out services within a year. But those plans had to be soon revised as the companies were faced with various issues, including promoterrelated problems. Today, SSTL, STel, Unitech and Loop Telecom have managed to launch services. Datacom and Etisalat are looking to do so in the first half of 2010.

As expected, the 2009 launches aimed at changing the tariff game through aggressive tariff cuts. With ambitions of gaining 10 million subscribers by the end of 2009, or 8 to 10 per cent market share by 2012, what else could the new operators do? After all, they had to contend with entrenched heavyweights such as Bharti Airtel, Vodafone Essar, Reliance Communications (RCOM), Bharat Sanchar Nigam Limited (BSNL), Idea Cellular and Tata Teleservices Limited (TTSL) –­ all with deep financial muscle, a decade of experience in the telecom field, and not willing to concede an inch of telecom space.

But the new players had several advantages too. They could avoid the past mistakes of other players, they came in at a time when most of the regulatory and policy hurdles had been removed, they could share infrastructure, thus avoiding heavy investment costs, and they could get the pick of the latest technology.

Today, as the sector embarks on year 2010, tele.net surveys the ground covered by the new players so far...

Datacom
The Videocon Group-promoted Datacom seemed aggressive initially. It received spectrum early and had plans to launch services by August 2008.However, mid-year, problems cropped up between the two promoters –­ Videocon Industries (64 per cent) and the Mahendra Nahata Group-owned Jumbo Techno Services. This impacted the company's rollout plans.

Meanwhile, the company's prospects of gaining a suitable international partner are looking up. Vivendi SA, a French media and telecom company, is in exploratory talks to buy a stake in Datacom Solutions. According to company sources, officers from Vivendi have held two rounds of talks with Datacom to acquire a majority stake.

Having received spectrum in most circles, the company initially planned to launch services in four circles in 2009 and to expand to other circles by end-2010.These plans have, however, been revised and the company now indicates early 2010 for service rollout.

In 2008, Datacom obtained licences to offer long distance services. It plans to establish a pan-Indian network for both national and international gateways. Datacom also hopes to carve a niche for itself in the enterprise segment.

Meanwhile, the company has kept itself busy on other fronts. It has, for example, signed an infrastructure-sharing deal with TTSL that will allow it to lease bandwidth as well as towers across the country. While TTSL will provide transmission services, Wireless-TT Infoservices Limited, the tower joint venture of TTSL and Quippo Telecom Infrastructure, will provide passive infrastructure like towers and shelters.

Similarly, incumbent Bharat Sanchar Nigam Limited (BSNL) has entered into an agreement with Datacom for sharing of passive infrastructure. The agreement has given Datacom access to more than 42,000 BSNL towers across the country (except in Delhi and Mumbai).

Etisalat DB
Etisalat DB and Datacom are the only two new operators that are yet to roll out services. They were expected to do so by end-2009 but will now probably launch services by early 2010. The erstwhile Swan Telecom was one of the first new licensees to divest a part of its stake to a strategic foreign player. In September 2008, telecom major Emirates Telecommunications Corporation (Etisalat) bought a 45 per cent stake in Swan for $900 million. The remaining 55 per cent is held by several entities including the Dynamix Balwas Group, a Mumbai-based real estate and hospitality business group.

In fact, Etisalat is planning to increase its stake to 50 per cent from the current 45 per cent. The company has applied to the Foreign Investment Promotion Board (FIPB) as foreign direct investment beyond 49 per cent in the telecom sector needs government approval. Though the Department of Industrial Policy and Promotion has cleared the proposal, FIPB has deferred it, citing security concerns.

In October 2009, the company received DoT's approval to offer long distance (national and international) services. This was in addition to securing the government's approval to operate as an internet service provider. These three licences are expected to enable the company to offer  mobile and fixed line services, carry voice and data traffic, and offer internet services.

In June 2009, Etisalat DB's board announced a change in name to Etisalat DB Telecom India. The company has licences to operate in 13 circles: Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu (including Chennai), Uttar Pradesh (East) and Uttar Pradesh (West). It recently proposed to acquire Allianz Infratech's UAS licences for two circles. This would give Etisalat access to 15 circles.

Meanwhile, the company's ownership profile was further tweaked in December 2009 with Etisalat acquiring 5.27 per cent stake from Chennai-based Genex Exim Ventures for about Rs 3.8 billion. The company has approached the Foreign Investment Promotion Board for approval of the deal.

Loop Telecom
Loop Telecom, a wholly owned subsidiary of BPL Mobile, obtained a licence to offer GSM services in 2007. It, however, got caught in ownership-related issues with both UK-based Vodafone and the Essar Group staking a claim on BPL Mobile. This stalled the company's initial plans for a rapid rollout as Vodafone Essar and the Essar Group got involved in arbitration proceedings. That conflict is yet to be resolved.

Meanwhile, Loop Telecom launched GSM services in Tamil Nadu and Orissa in May 2009, and in Karnataka and Kerala in July the same year. The company recently shortlisted Tech Mahindra, Wipro and IBM for an IT outsourcing contract worth around $400 million. The contract is reportedly spread across 10 years and entails integration and maintenance of the operator's IT system across 22 circles. Loop is exploring an operating expenditure model, under which the shortlisted players can take its IT assets on their books.

On the customer front, the company has launched several initiatives. For example, it has introduced the "Mumbai Ka Gang" offer, which enables users in Mumbai to make all local calls within the network at Re 0.10 per minute.

Sistema Shyam TeleServices Shyam Telelink, in which Russian communications major Sistema had a majority stake, applied for a pan-Indian licence in 2007 and was awarded licences to launch CDMA services across the country in January 2008.

Sistema had been steadily increasing its shareholding in Shyam since 2007. Currently, its stake in the company stands at a little over 73 per cent. DoT recently gave its clearance for the Russian government to acquire 19.8 per cent stake in SSTL for $676 million. Therefore, further changes in the shareholding pattern are expected.

In 2008, Shyam Telelink entered into a strategic tie-up with Mobile TeleSystems (MTS), the largest mobile phone operator in Russia, to bring the global brand into the country. According to the agreement, Shyam Telelink could use the MTS brand for all its marketing, communications and advertising in India. Consequently, in early 2009, the company undertook a major brand-building exercise.

SSTL currently operates in Delhi, Kolkata, Mumbai, West Bengal, Rajasthan, Tamil Nadu, Karnataka, Kerala, Bihar, Jharkhand, Haryana and Maharashtra (Pune). The company expects to have a pan-Indian footprint by end-2010.

To acquire users in this highly competitive market, SSTL recently followed the industry leaders to introduce a per-second billing tariff plan, charging users Re 0.005 per second for local calls (as against Re 0.01 per second charged by most operators currently) and Re 0.10 per second for STD calls to other MTS numbers. It also introduced high speed data services under the brand MBlaze, offering users download speeds from 150 MB to 10 GB, at monthly rentals of Rs 198 to Rs 595.

Going forward, SSTL is looking to integrate its voice and internet services to drive higher average revenue per user. The company also plans to offer mobile broadband services on handsets and a host of services around it. For this, SSTL has entered into long-term agreements with RailTel, RCOM and TTSL to lease internet bandwidth. The company also plans to roll out an array of co-branded high-end mobile phones and smartphones with vendors like Samsung, Fly, ZTE and Huawei which will be configured for high speed internet access.

The company is also in advanced talks with Research In Motion to offer BlackBerry services, which, according to company sources, may be commercially available by March 2010.

S Tel
Promoted by Skycity Foundations and Mauritius-based Telecom Investments, STel received licences to provide mobile services in six telecom circles in January 2008. The circles were Bihar, Orissa, Jammu & Kashmir, Himachal Pradesh, Assam and the Northeast.

 

In January 2009, Bahrain Telecommunications Company (Batelco) signed an agreement to acquire 49 per cent stake in STel for $225 million. Batelco partnered with Millennium Private Equity, a Dubaibased financial services authority-regulated entity, to form Batelco Millennium India to purchase stake in STel.

In another change in ownership patterns, the company has recently inducted Global Banking Corporation (GB Corp) as one its shareholders with an 11 per cent stake in the company. Through this fresh issue, Batelco Millennium India Company (BMIC) will now hold 49 per cent (following an internal arrangement between BMIC and GB Corp) and the Indian promoters, the Siva Group, will hold the remaining 51 per cent.

STel launched services in Himachal Pradesh, Jharkhand, Bihar and Orissa in December 2009, and plans to follow it up with launches in Assam, Jammu & Kashmir and the Northeast. In these circles, which the company terms as growth states, the management has set a target of about 15 per cent market share by 2015.

The company has introduced two tariff plans in Himachal Pradesh: the per-second plan and the All@50 paise plan. Under the first, STel subscribers can make local and STD calls at Re 0.10 per second and under the second, subscribers can make calls at Re 0.50 per minute.

STel has also lined up a portfolio of value-added service offerings in the circle, covering entertainment as well as knowledge-based content, such as "learn English" and examination tips over its IVR service.

On the distribution front, STel plans to leverage non-traditional channels (NTCs) to make its products available at the consumer's doorstep. NTCs will include business units such as insurance agencies, cable operators and courier services. The company has signed an agreement with Indiatimes.com to offer rich localised content to its consumers.

To facilitate expansion, STel is sharing infrastructure with the existing operators and has decided to not put up any tower of its own. It has signed an end-to-end telecom infrastructure agreement with Reliance Infratel for telecom towers, transmission for base transceiver station sites and fibre backbone for intercity connectivity. Its agreement with RCOM covers all telecom circles where the operator plans to roll out GSM services.

Unitech Wireless
Unitech Wireless (which provides services under the brand Uninor) received spectrum to operate in 21 out of the 22 circles in 2007. It agreed to offload a 60 per cent stake to Norway's Telenor for $1.2 billion in 2008. For a new operator, with no network or subscribers, it was a good deal; more so since it had found a partner under vulnerable market conditions. The deal put the enterprise value of Unitech Wireless at Rs 116.2 billion.

The funds have been utilised mostly for rolling out networks and services. A part of it, of course, has been retained to bid for 3G spectrum as and when the auctions take place.

Recently, Unitech Wireless rolled out GSM-based services as the twelfth operator in eight circles in nine states. The states are Tamil Nadu, Kerala, Karnataka, Andhra Pradesh, Uttar Pradesh, Orissa, Uttarakhand, Jharkhand and Bihar.

By end-2010, the company intends to be present in all 22 circles in the country. Putting its rollout objectives on a fast track, the company has decided to lease and rent towers instead of building them, which will also help cut capital costs significantly. Further, in order to reduce the time-to-market, the company has outsourced its entire backend service needs to Wipro and Telcordia.

Uninor has signed outsourcing deals with Genpact to provide it support in process re-engineering, inbound and outbound customer services, and training for five years. Similarly, it has tied up with Wireless-TT Info Services for towers, and has awarded contracts for network equipment for eight circles to Alcatel-Lucent, Huawei, Ericsson and Nokia Siemens Networks. As a new operator in a highly competitive market, Uninor offered aggressive tariffs of Re 0.29 per minute for local calls and Re 0.49 for STD calls.

Meanwhile, Telenor's India strategy is clear. It is looking at a long-term engagement in the country. In fact, the government recently approved Telenor's proposal to raise its stake in Uninor to 74 per cent, the maximum permitted in the sector. The company is looking at cornering a market share of 8 per cent within three years.

Following this approval, the Telenor Group recently announced that it has placed a third round of investment of Rs 1,4.93 billion into Uninor, taking its stake to 60.11 per cent. The Telenor Group's total committed investment for 67.25 per cent equity in Unitech Wireless is Rs 61.20 billion.

It intends to set up retail outlets for selling mobile telephony services, apart from appointing franchisees. So far, the company has signed agreements with around 1,000 distributors and has established 300,000 points of sale.

Net, net, even though the new players started off slowly, they are now on a roll, with ambitious plans to expand their footprint across the country.



 
 
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