Sunil Mittal shared his thoughts on new opportunities in the Indian economy and Bharti’s rise as a telecom giant, in his convocation address at the IIM Bangalore. Here are some key points collected from varioussources.
Mittal came out of college in 1976. The period 1976 to 1985 was “a period of great struggle, of great pain but one of great learning”.
“Learning that I could not take form B-school because I went straight to business after university. I picked up on the streets. I learnt my lessons on the streets and at every opportunity, tried to assimilate, gather, absorb some of the practices that were required to create an enterprise.”
How Bharti emerged as the winner in the great Indian telecom war.
1985-86 - Mittal launches India’s first push-button telephones. Romance with telecom begins.
1992 - Applies for mobile licence.
1993-1995 saw some major litigation around this area.
1995 - First licence awarded, Bharti gets licence to provide mobile telephony in Delhi.
Realises its a big monies game. Difficult times.
1996 - Round two. Big industrial houses who missed the bus in round one jump in this time. Bid goes as high as Rs 85,000 crore.
Bharti expands slowly picking up the circles of Karnataka, Andhra Pradesh and Chennai followed by Punjab and Kolkata, among others.
Mittal’s views on the new opportunties in India.
Software, ITES and Telecommunications is a ‘done deal’.
Hospitality, Healthcare and tourism will be the next big waves.
630 million people in India are of working age, projected to go up to 837 million by 2010 making India a continent of consumers in six years.
India had a huge lead in the manufacturing sector but suddenly, in the last 20 years, China chipped in this area and we lost.
“I personally believe India’s time has come”.
Mittal quotes Gandhiji: “those who try hard with lot of passion, eventually win”.
In a bid to lay a cellular network covering the entire population in the country, the state-owned company is leaving no stone unturned.
It is using even helicopters to fly down mobile equipment in areas where the road network is yet to reach. And if that’s not enough, BSNL has hired a fleet of trucks that ferry diesel every day to power the huge generators that run the mobile base stations, in areas where there is no electricity.
The company had recently floated a tender to acquire cellular equipment for rolling out 63 million lines, of which more than 50% is being deployed in rural India. BSNL is laying a full network in the North East too where the tough hilly terrain makes it hard for installing the equipment required to offer mobile services.
“By the end of this project, 100 per cent of habitable India will be covered. It is a challenging task but full of opportunity considering that India’s mobile penetration is only 8.5 per cent. There is a huge pent up demand,” said Mr Sinha.
The Business Line article says that BSNL has the highest ARPU, more than that of any private operator despite concentrating more on the semi-urban and rural areas.
BSNL has 16.1 million cellular users and is hoping to get 20 million users a year, most of which is expected to come from non-urban areas.
With 141 million gross subscriber base the telecom service industry is growing at the rate of 30% annually and its contribution to the country’s Gross Domestic Product (GDP) is 1% according to chairman of Telecom Dispute Settlement and Appellate Tribunal (TDSAT) Justice (Retd) N Santosh Hegde.
The telecom service industry with a turnover of Rs 90,000 crore during last one year expected its contribution to GDP to rise by another 1% over the next three years.
He said there were only 21 lakh telecom subscribers in Bihar (17 lakh BSNL and 4 lakh subscribers of other service providers). Similarly, the cable TV industry is also at a nascent stage with only five lakh cable TV homes, he said, adding India had around 60 to 66 million cable TV homes.
We have all done and benefitted from it - giving missed calls to convey messages. But what is the impact of missed calls on the carriers. This Zee News story puts the exact share of missed calls at around 20-25%.
Kobita Desai, principal telecom analyst, Gartner
“There is also a situation when the other person has to call back. No doubt mobile tariffs are quite low and the price differential with fixed is very narrow. However that is not necessarily the case with prepaid tariffs which is still significantly higher and also the pulse rate is shorter. Mobile calls are billed at 60 secs whereas fixed calls are billed at 180 secs.”
Who loses and who gains on missed calls
“it would depend on where the call originates from. If more calls originate from the fixed network then the lion’s share of the call revenue is retained by fixed network operator. However they would have to give a percentage to the mobile network as an interconnect or termination cost. Or vice versa. Often missed calls happen within mobile networks as well. Here there is loss of revenue on both sides, especially if the called party has caller line identification.”
“Missed calls have to originate from some network. So there’s always percentage given as interconnect/termination to the network on which the calls terminate. However good interconnect rates are dependent on the volume of traffic generated. In a non monopoly environment like India’s mobile industry, it becomes difficult for a carrier to arbitrage on good interconnect rates if they only invite incoming traffic,” she says.
“Further not getting threshold revenue (cost of servicing + margins) from their home subscribers may affect business sustainability in the mid to long term,” notes Desai.
According to ToI, the Indian mobile gaming industry is expected to touch Rs 1,500 crore by 2015 from the current figure of Rs 80 crore.
The article goes on to say that nearly 15,000 games are being downloaded everyday in India. The charges for downloads are usually upwards of Rs 50.
Doing some maths:
80,00,00,000 / (15,000 * 365) = 146
With 15,000 downloads a day and an industry turnover of Rs 80 crore, the average price of a game comes to Rs 146. This seems high. Am I missing something?
Airtel in association with WiderThan has announced the launch of Airtel Easy Music, available from over one lakh plus Airtel retail outlets. This makes Airtel the largest retailer for music not only within the country but also in the world.
Jay Kim, Senior Executive Vice-President, WiderThan Co. (an affiliate of SK Telecom)
“Easy Music is a revolutionary product that has never been attempted by any mobile operator in the world.
“With the market for mobile music set to grow exponentially in India, I believe that this product is set to redefine music retailing and will be a benchmark service for all operators internationally”.
Here is how it works:
* Choose your favourite song from the music catalogue available with the retailer.
* Tell the retailer your choice.
* Retailer will just press a few keys on his phone and download a song (Hello Tunes or Ringtone) to your mobile phone. In the case of Hello Tunes you will be required to dial 674 (tollfree) to confirm acceptance of the song.
* You will also get an SMS confirming the successful download of your song.
* Finally you can pay the retailer for the song and walk out…as simple as that.
This is an important development, especially for the personalisation segment (ringtones, wallpapers). Content download revenue of GSM operators is constrained by the difficulties in GPRS enabling their users. Airtel has demonstrated the possibility of an alternative retail strategy for mobile content.
It is a win-win situation for all entities. The customer can now personalise his mobile without worrying about the technical details, the retailer receives a cut for every transaction and Airtel gains from increased base of subscribers who can now buy the content.
CIOL puts the Indian music market size at around 1890 crore. Out of this digital mobile music market is around 900 crore, which is around 47%.
BSNL has discovered the potential of its ubiquitous PCOs for branding and retailing. The company has decided to convert its PCOs and STD/ISD booths into branded outlets. There are over a million BSNL PCOs which contribute around 20 to 25% of its revenues.
A few months ago, the company allowed the sale of recharge coupons and Sancharnet cards (pre-paid internet access cards) through STD/PCO operators at 3% commission. PCO owners can book and instal broadband connections for BSNL.
They are paid a commission of Rs 100 for booking and Rs 100 for installation.“The model will be expanded to include the sale of SIM cards, landline bookings and bill collections. The outlets will have BSNL boardings and logos.However, the commission rate is likely to remain 3% even after the branding exercise,” the sources said.
The move is also likely to restore the fortune of PCO owners, most of whom have been losing business due to the falling long-distance call rates, especially with the introduction of plans like OneIndia and wider availability of cell phones.
Secunderabad-based XL Telecom, an assembly partner and distributor of Kyocera Wireless Corp, is planning an initial public offering (IPO) of around Rs 60 crore in the next few months. Kyocera Wireless is a global manufacturer of CDMA wireless phones.
XL Telecom plans to set up an assembly line based on surface mount technology, which is basically a manufacturing process where components are attached on the surface of the printed circuit board, instead of being fitted with wire leads into holes in the circuit board.
XL Telecom ended last year with revenues of Rs 300 crore and will be closing this year (June 30, 2006) at Rs 450 crore revenues.
Mobile content aggregator and Bulk SMS provider Cellebrum has signed a deal with Sweden based Mobile TV provider Kamera for the distribution of its video content to mobile users in India.
Kamera provides TV and video content for online and mobile distribution, including content from Associated Press Television News, entertainment channel WOW! TV and sports content from SportCall.
Almost every operator offers video content on their portal. But the GPRS networks of the operators are not tuned to handle high video traffic. With network upgrades to EDGE and and expected rollout of 3G this year, demand for rich media content is set to increase. Currently, CDMA provider Reliance is the only operator which boasts of significant video downloads.
Savinder Sarna, Head-Sales & Marketing of Cellebrum
“We believe that entertainment & sports videos have got a lot of potential among the subscribers of India and with the advent of 3G, stickiness to mobile videos shall grow”
Business Standard reports that Bharat Sanchar Nigam Ltd today issued the world’s single largest GSM mobile tender for a total of 45.5 million lines. Going by current estimated equipment prices, this order can be worth anywhere between $2.5 billion and $4 billion.
The list of prospective bidders includes most global telecom equipment companies, including Nokia Networks, Ericsson, Siemens, Nortel, Motorola, Lucent and Alcatel. But one single company will not get the entire order.
Under the two-stage bidding slated to open on April 28, successful vendors will have to achieve a minimum of 30% value addition on indigenously manufactured core equipment.
The equipment will have to be 3G mobile technology-enabled. The tender stipulates that bidders must provide an undertaking that network elements support both 2G and 3G technologies for the next seven years with a product portfolio and road map for implementation on the entire network.
BSNL has set a number of stiff conditions and safety clauses in the tender.
Nripendra Misra is the new chairman of the Telecom Regulatory Authority of India (TRAI). Pradip Baijal, the existing chairman, retired on Tuesday.
He will be the first TRAI chairman who has prior experience in the telecom sector. Misra has worked as chairman of the telecom commission and as secretary of the department of telecommunications (DoT).
Misra’s appointment as the new chairman is likely to end an unhealthy relationship between TRAI and the DoT. During the past year, TRAI and DoT opposed each other on almost all important decisions.
Misra’s brief would be to evolve a regulatory framework that did not curtail technological evolution, considering that boundaries between the platforms for telecom, broadcasting and broadband were rapidly blurring. Misra will also have the tough task of reviewing further reduction in access deficit charge within two months of taking charge, and also oversee its eventual withdrawal by 2009.
“What if a great man of the last century – Gandhi, had access to the communications networks of our age when he made one of his most important speeches?”
Shopping portal SifyMall.com has announced that its users will be able to buy products and services over their phones and pay using JiGrahak’s m-commerce/m-payment platform ‘NGPay’ (Next Generation Pay).
Anyone with a GPRS enabled mobile connection can log on to www.ngpay.com, and download the NGPay application on to their mobile handsets.
Once installed, the intuitive user interface can be used to shop “Anytime, Anywhere” for a wide range of products like flowers, books, Movie DVDs and VCDs on SifyMall.com. Payments can be made using credit cards to start with, and can soon be made from bank accounts as well.
Krishnan Thiagarajan takes stock of Bharti Tele-Ventures, Reliance Communication Ventures and Hutchinson Essar from a financial markets perspective.
While BTV and RCV are integrated (mobile, fixed and long distance) players, Hutchinson Essar is a mobile pure-play.
Operating profit margin:
Across the three companies, the sequential (quarter-on-quarter) revenue growth of the mobile business for the third quarter ended December 31, 2005 was quite healthy in the 11-14% bracket.
But it is the operating profit margin, at 36.5% in the mobile segment, that puts Bharti ahead of the pack and makes it the most efficient.
This is the metric that will be tracked across companies on a quarterly basis.
According to Bharti, as long as it remains in the capital investment mode, more than ARPU, it will track its performance across a three-line graph comprising gross revenues, opex productivity (operating expense divided by gross revenues), and capital productivity (gross revenues divided by gross fixed assets and intangibles). As a part of this formula, Bharti believes that as long as absolute revenues keep increasing, productivity of opex either stabilises or keeps coming down and capex keeps improving, the company’s overall financial health can be tracked.
Usage metrics:
While the average revenue per user (ARPU) is the highest for Hutch at Rs 511 for the third quarter, its average minutes of use per user, is the lowest among the players.
Bharti has an ARPU that is 8% lower at Rs 470, but the usage is higher, at 411 minutes, than Hutch.
RCV has the lowest ARPU of Rs 412. However, its minute of usage is 33% higher than Bharti, at 547 minutes.
Performance metrics:
Enterprise value (EV; market capitalisation plus debt) to EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the operational cash flows that can be deployed for growth.
Based on the annualised third quarter performance, the EV/EBITDA of the mobile segment of Bharti works out to 16.6 times.
RCV’s valuation is at a 15 per cent discount to Bharti.
For Hutch, the discount is under 5 per cent to Bharti, if the enterprise value is based on Kotak’s sale of equity in Hutchison Essar, struck at $6 billion of market capitalisation.
EV/subscriber reflects the potential for future cash flows.
The EV on a per subscriber basis for Bharti works out to Rs 32,000.
On this metric, RCV trades at 25per cent discount to Bharti and Hutch about 20 per cent.
According to a latest report of the Comptroller and Auditor General (CAG), three telecom PSUs - BSNL, MTNL and ITI - have suffered a loss in revenues of Rs 527.52 crore during 2004-05 due to various reasons including short or non recovery of dues or unproductive expenditure. BSNL was on the top with revenue loss worth Rs 405 crore followed by ITI with Rs 66.89 crore and MTNL with Rs 55.50 crore.
“BSNL has failed to safeguard its financial interests, by not obtaining appropriate bank guarantees from the ISD operators as per the agreement and also delayed disconnection of Point of Interconnection between October 2003 and April 2005 of Data Access (India) Ltd resulting in non-realisation of interconnection charges of Rs 219.62 crore,” CAG said.
“The company (MTNL) invested surplus funds of Rs 100 crore in another PSU — Indian Telephone Industries (ITI) which was incurring losses since 2001-02 in contravention of department of public enterprises (DPE) guidelines,” the report said, adding that the dividend of Rs 17.50 crore for the years 2002-03 and 2003-2004 was also not paid by ITI. The CAG also pulled up MTNL for blocking capital purchase of land.
ITI suffered financial irregularity of Rs 66.89 crore mainly on account of idle and irregular expenditure and loss or overpayment, the report added.
CAG audits and assists the state and central institutions on their accounts and accountability.
Reuters has compiled some facts and figures about Reliance Communications Ventures Ltd., which made its stock market debut recently and was trading at Rs 322.40 on Friday.
Reliance Communications is the holding company for top CDMA operator Reliance Infocomm Ltd., GSM operator Reliance Telecom Ltd., bandwidth company Flag Telecom Ltd. and Reliance Communication Infrastructure Ltd.
Stock market value of about $8 billion, putting it among India’s top 15 listed firms.
The Ambani family holds 40.5 percent and foreign institutions have 25.2 percent. Retail investors hold 16.3 percent, with the rest held by banks and funds.
Trading at an estimated price earnings multiple of 28, based on results for the third quarter to December, compared with 34 for Bharti based on forecast 2005-06 earnings.
Much of its revenue come from its holding in CDMA services provider Reliance Infocomm Ltd.
Reliance has the largest optic fibre network amongst private players at about 61,500 km, compared with about 30,000 km for Bharti and 29,000 km for Videsh Sanchar Nigam Ltd.
Reliance has a book value of about 90 rupees a share and a net debt of nearly 37 billion rupees.
It has a consolidated net worth of 110 billion rupees after two of its firms made write-offs and provisions in excess of $1 billion last month, ahead of the listing.
It has a capital of 1.223 billion shares, each having a face value of five rupees.
Indiantelevision.com interviews Saumil Nanavati, president of Singapore based 3G radio service provider Sydus.
Last year the company, in partnership with Virgin Radio, introduced MobileRadio, claimed to be the world’s first 3G radio. Indian users are amongst the top six users of Sydus’ MobileRadio technology for Virgin Radio UK’s service.
According to a recent study, The Future of Mobile Music, which studies the growth of the mobile music market in 28 countries the mobile music market is the most valuable mobile content market globally, generating gross revenues of $4.4 billion in 2005, rising to nearly $6 billion in 2006. Mobile, it is said, now accounts for nearly 15 per cent of the entire music market globally.
Consumers require a Symbian or MS Windows handset, the Sydus software and GPRS connection to use the service. What it means is that listeners to Sydus Mobile Radio will have to pay GPRS data download charges everytime they tune in to the service. This is in contrast to FM radio which is very popular among Indian mobile users. Many handsets already come with FM radio capability and one doen’t have to pay extra for listening to broadcast radio stations.
Nanavati explains that Indian content publishers can benefit from Sydus’ technology by reaching Non-Resident Indians or Indian-content-loving users. The technology is only as lucrative as its reach, which is dependent on the number of client software downloads and installations. But the article doesn’t mention the installed base of the Sydus app. Since they are not tying up with operators they are relying on content publisher brands like Virgin Radio for spreading the word.
Sunil Mittal shared his thoughts on new opportunities in the Indian economy and Bharti’s rise as a telecom giant, in his convocation address at the IIM Bangalore. Here are some key points collected from various sources.
