M for Mobile. M for Money. M for Mobile Money.

This artice in ET may seem to be aggrandizing the scope for mobile payments. But I think the writer Mayur Shetty is on solid ground when seeing possibilities for some sort of convergence between banks and mobile operators. Japan and Slovenia are two countries I know where such convergence experiments are already being conducted. More on that later.

Key points from the article:

• It is not rival financial service companies but the telecom operators who might well emerge as the biggest challengers to the monopoly that banks have had over the industry of money.
• The total money mobilised by telecom companies as advance payment from pre-paid users for talktime works out to Rs 4,459 crore.
• The advanced billing systems used by telcos allow them to record the smallest transaction in a cost effective manner, making it suitable for micro-payments.
• Total number of bank accounts in the country, stands at 334 million savings and current accounts.
• “Phone banking” is currently seen as a value added service provided by banks that allows you to operate your bank account over the phone.
• Mobile phone might well emerge as one the major payment channels.
• Banks and telcos can collaborate to offer the latest in banking services to the rural areas.
• Banks can use mobile service providers for delivery of microfinance.
• Tying up with banks can help telcos to reduce non-performing assets and collect payments.

Here’s wishing all readers of Mobile Pundit a Happy 2007!

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Pune based telecom software servics company Tech Mahindra has signed a five-year outsourcing deal with British Telecom (BT) that is expected to generate revenues of over $1 billion. This is the largest contract bagged by any software services firm in India.

The company will support BT’s planned growth of managed services to business customers around the globe and continue to provide ongoing services related to BT’s internal systems, processes and reusable platforms.

BT is already the largest customer for Tech Mahindra and contributes over 69% of its total revenues. The company had revenues of $270 million in 2006. The deal could potentially nearly double the firm’s revenues next year. However, analysts are skeptical about whether such high numbers will be realized.

BT itself is bidding for outsourcing deals across the world so it’s possible BT may decide to pass on some of the wins to Tech Mahindra.

“Since there appears to be a significant subcontracting component to this deal, the actual size of the contract will depend upon several factors, including BT’s own ability to get customers,” said Siddharth Pai, a partner at the strategic analyst firm TPI.

Both companies have a 20-year history together. Tech-Mahindra was earlier called Mahindra-British Telecom (MBT), and it was a joint venture between British Telecom and Mahindra & Mahindra. MBT was renamed Tech-Mahindra before it went public earlier this year.

British Telecom has a 36% stake in Tech Mahindra. Mahindra group holds 51% in the company, while the remaining is with public.

Sources: Red Herring and ET

The Mumbai chapter of Mobile Monday held its sixth event at Mobile2Win’s office on 18th December. There was a panel discussion on the topic “Mobile Music - Untapped revenue streams”.

The Bangalore MoMo chapter also held its sixth event on the same day on the topic “3G in India”.

Mobile Monday Hyderabad kick-started its activities last month. November’s topic was “User Generated Content” while December’s topic was “WiMAX & Mobility”.

Incidentally, 18th December saw all the three Mobile Monday chapters in India simultaneously conducting their events.

The Chennai chapter of Mobile Monday is also in the works. MoMo Delhi held its first event a few months back and is planning for a second event sometime next year.

Hong Kong based Hutchison Telecommunications International (HTIL) is conducting a Swayamvar of its Indian subsidiary Hutch-Essar (HEL). And all the big and small maharajas of Indian telecom are lining up.

Buying and selling businesses is not alien to Hutchison Whampoa, headed by billionaire Li Ka Shing. The group sells a business as and when it gets good value.

there are multiple reasons supporting a possible sale: Telecom valuations are currently high (with HEL being valued at nearly $14 billion), the group needs money to repay debts and Hutchison Telecommunications International (HTIL), which holds 67% in HEL, has failed to take public its Indian arm.

Hutch Essar is understood to be valued between $13-17 billion. Research firm Macquarie puts Hutch’s enterprise value (EV) at $13.8 billion while ET estimates the value to be around $15-17 billion.

The Indian telecom market is the fastest growing in the world and pre-tax profits for the top three or four telcos are said to be in the region of 40%.

List of would-be suitors is growing by the day - from Reliance Communications to Essar Group to Maxis of Malaysia, besides Orascom, Qatar Telecom, Vodafone and perhaps Bharti Airtel.

Reliance Communications is believed to have tied up with four American equity funders — Blackstone, Texas Pacific Group, KKR and Carlyle. For Reliance it makes sense to acquire Hutch Essar. Reliance Communications has a subscriber base of about 24 million, second only to Bharti Airtel’s 30 million and a shade larger than Hutch Essar’s 22 million. Reliance’s acquisition of Hutch Essar would propel him to a dominant numero uno position.

But it isn’t enough for Hutchison to agree to Reliance’s offer to buy its 67% even though it would give him majority control of Hutch Essar. Under law, it’s all or almost nothing: he has to stay below 10% or he has to buy out the entire 100%. Therefore, unless Essar’s Ruias agree to sell their 33% and exit Hutch Essar, Reliance cannot enter. But regulatory guidelines do not pose hurdles in the way of Reliance acquiring Hutch.

As per the guidelines, the combined entity can’t hold more than 15 MHz of spectrum in Metro and A category circles and 12.4 MHz spectrum in B & C circles. RCL faces the spectrum regulatory issues only in two circles.

RCL’s GSM arm, Reliance Telecom, offers services in eight circles, of which it overlaps with HEL in West Bengal and Kolkata. HEL is not present in RCL’s other GSM circles — MP, North-East, HP, Bihar, Orissa and Assam.

Also, the market share of the combined entity should not exceed 67% in any circle. However, this will not be the case in any of the 23 circles for RCL.

Bharti Airtel: ET speculates on the plans of Sunil Mittal. Is he talking to Vodafone and Singtel? Reliance’s acquisition of Hutch Essar would have serious implications, leaving him a distant no. 2 in the game.

But when asked if Bharti Airtel would team up with its strategic investors, Singtel and Vodafone, to bid for HEL, Mr Mittal said the speculation was baseless and Bharti had never considered the move. Bharti has refrained from making a bid for HEL as the company is focused on its own expansion, and don’t want to be dragged into legal and regulatory issues associated with the buy-out.

As per the Indian telecom mergers and acquisitions guidelines, no company can have more than 15 MHz of spectrum in a licence area. A merged entity of Hutch and Bharti would therefore have to vacate spectrum in all circles where they jointly have more than 15 MHz.

Vodafone: ET reports that the UK-based giant is quietly drawing up plans to throw its hat in the ring for Hutch-Essar. Talks are on with bankers and advisors on the strategy to be adopted.

The company is also believed to be exploring options of selling its stake in the Bharti group. It is believed that UBS, Vodafone’s house banker, has been asked to explore options of selling its combined 10% stake in Bharti Airtel.

But the shareholding agreement with Sunil Mittal’s Bharti group has a non-compete clause that bars Vodafone from competing with Bharti for one year after the sale of shares in the Indian company.

Maxis: The Malaysian operator headed by Anand Krishnan, which operates Aircel in India, is understood to have engaged Standard Chartered as their adviser.

But Hutchison is believed to have rejected a $13.5 billion bid from Maxis with private equity firm Texas Pacific Group. This implies that Hutchison is looking at a higher valuation.

Orascom: The Egyptian telco, which has over 19% stake in Hong Kong-based HTIL, is understood to have appointed Deutsche Bank as their adviser. Orascom, a key player in Pakistan, has raised security concerns among intelligence agencies.

Essar Group: The Ruias of Essar group are in talks with various European and US banks to raise funds. They have recently appointed J M Morgan Stanley to advise them on the transaction. The group is also seen to have invited Qatar Telecom and Isthitmar - the private equity arm of Dubai government.

There are reports that Essar would not be averse to exit from the venture if the valuation was right.

The Ruias have had their share of problems with Hutchison and the strongwilled Hutch Essar CEO Asim Ghosh.

From various accounts, Shashi Ruia and Ghosh share a certain bond based on mutual respect and fondness; but it’s Ravi Ruia who’s been the pointman for Essar on Hutch and it’s not known whether there’s happy co-existence on that front. There have been unconfirmed stories in the past that Ravi believes that their 33% stake in Hutch Essar entitles them to a greater say in management. But they also recognise that Ghosh and his team have built enormous value for them.

Hutchison adviser Goldman Sachs is understood to be dealing with the three bidders and is believed to have communicated that a decision could taken in the next few weeks. A call for the soother could be taken in less than a month.

Lets see who will be the charming prince to get the varmala.

Sources: Various articles in Economic Times.

The December event of Mobile Monday Mumbai will be held on 18th of the month.

The topic of the month is “The Mobile Music Market in India - Untapped Revenue Streams”.

Many thanks to Mobile2win for hosting the event.

Agenda:
There will be a Keynote address followed by Panel discussion on the topic.

Panel Members:

• Rajiv Hiranandani, Country Head, Mobile2win
• Rajjat Kakkar, MD, Universal Music
• Shailesh Varudkar, AVP - VAS, Hutch
• Kaushal Modi, Head - Licensing & Telephony, Sony Entertainment Television

When:
Monday, 18th December, 2006
6.30 pm - 9.30 pm

Sponsors:

Admission to the event is free for mobile industry professionals and enthusiasts. But seats are limited and admission is strictly for confirmed registered participants only.

So please Register if you are planning to come.

Click here for address and directions.

Its a week full of big news.

One of India’s top media and entertainment companies UTV Software has decided to acquire the controlling stake in Indiagames - the largest gaming company in India and Ignition Entertainment - a console gaming company based in UK.

The proposed acquisition of controlling stake in Indiagames is for Rs 68 crore, while a 70 per cent stake in Ignition Entertainment is for around Rs 60 crore.

IG pioneered mobile and online gaming in India and is presently involved with mobile game development, publishing and distribution across 67 countries through 80 telecom partners like Vodafone, Verizon, Hutch and Airtel. Its latest venture into PC games distributed online through broadband ISPs like BSNL, MTNL, Airtel and Tata VSNL amongst others is expected to be a major value driver for the Company.

Vishal Gondal, CEO and Founder of Indiagames, will continue to head the company.

Related:
TOM Online may exit Indiagames

GSM subscriber base in the country has crossed the 100-million landmark. 5 million new GSM subscribers were added in November, which is the largest since cellular services began in India in 1995.

India has now become the third-largest GSM market in the world behind China (401.7 million subscribers) and Russia (152.2 million).

During October, India had created a global record by adding 6.5 million new wireless (including both CDMA and GSM) subscribers.

The largest CDMA player, Reliance Communications, has added 1.35 million users in November, taking its total subscriber base to 29 million. The GSM plus Reliance Communications new additions figure in November totals up to 6.35 million and industry sources are confident that the total addition by operators on both technology platforms will cross the 7-million mark, creating a new record.

As per data compiled by the Cellular Operators Association of India (COAI), the GSM subscriber base stood at 101.7 million by November-end, when compared to 96 million in October, 2006.

Bharti Airtel added over 1.65 million new users, crossing the 30-million mark.

Hutchison Essar added just over 1 million new users, taking its total base to 22.2 million.

BSNL, with the addition of just under a million new subscribers in November has a subscriber base of just under 23 million.

Among all circles, Category C circles witnessed the highest rate of growth at 6.9%, followed by Category B circles at 6.1%.

Within the Category C circles, the highest growth was recorded by Bihar at 8.5% followed by Assam at 8.4%, while in Category B circles, Haryana and MP recorded the highest growth at 9.6% and 6.9%, respectively.

Source: ET

Hong Kong-based Hutchison Whampoa group is believed to be considering a sale of its telecom business, including its highly lucrative Indian operations.

Sources close to Hutchison Whampoa said the Hong Kong-based giant is willing to consider a sale. While no formal mandate has been given, Goldman Sachs and ABN Amro are believed to have talked to investors for a possible purchase of the stake.

American private equity firms Blackstone Group and Texas Pacific Partners are looking at buying Hutchison Essar, the country’s fourth-largest telecom operator. Blackstone and Texas Pacific may shell out in excess of $8 billion to acquire Hutchison Telecommunications International’s (HTIL) holding in its Indian joint venture Hutch Essar.

According to the Wall Street Journal, Blackstone is in talks with Reliance Communications to bid for the operations. However, an Anil Ambani group official dismissed the possibility.

Hutchison Essar’s enterprise valuation is at over $11 billion. HTIL owns 67% in Hutch Essar, its joint venture with the Essar group which holds rest of the equity. Egyptian cellular operator Orascom indirectly holds close to 12% in the joint venture.

Hutch Essar doubled its user base to 20 million in the last 12 months and expects to close the current year with 25 million users.

This kind of numbers, Ka Shing told the Ruias, will double the valuation of the business over the next couple of years. Exiting at this point, therefore, would be akin to selling cheap — not the kind of thing the Hong Kong businessman is known for.

Industry sources close to Hutch Essar said HTIL chairman Li Ka Shing, in a recent meeting with the top management of Essar, repeatedly told his Indian partners that he had no intention to exit the telecom business in India. On the contrary, he spoke of the 10 lakh subscribers who are being added to the subscriber base of the company every month.

If HTIL intends to sell its Indian operations, the first right of refusal resides with JV partner Essar group.

Source: ET

ET reports that VC firm Sequoia Capital has picked up about 1.5% stake in Idea Cellular for around $48 million.

According to sources, this transaction has taken place at a higher price as compared to what was paid by other PE players and hedge funds, who recently picked up stake in Idea Cellular.

US-based Providence Equity Partner’s 15% in Idea Cellular came for about $400 million, while UK-based hedge fund group GLG Partners is believed to have picked up 5-8% equity for about $210 million. Prior to that, the Aditya Birla company had also offloaded 10% stake to TA Associates of the UK, Citigroup and India’s ChrysCapital.

Idea Cellular filed a draft red herring prospectus with the Securities and Exchange Board of India (Sebi) for its initial public offering. Idea is planning to raise about Rs 2,500 crore through its IPO, and will also go in for a pre-IPO private placement of 15% of the shares to be offered through the issue.

So who made Rs1,000cr out of Idea? ET has reasons to believe that they are a well-known serial entrepreneur and an equally renowned investment banker.

Hutchison Essar’s deputy MD, Sandip Das, is joining Maxis Malaysia, as its CEO. Maxis Malaysia is Malaysia’s largest telecommunications companyhaving a market capitalisation of $6.4 billion.

Apart from his role as CEO of the Malaysian company, Mr Das will also have a strategic role of supporting the India operations of Maxis. The Malaysian telco had entered India by acquiring a 74% stake in Aircel late last year. Ex-Bharti hand, Jagdish Kini, is currently the CEO of Aircel in India.

Speaking to ET on his new role:

My primary responsibility is to ensure the growth of the flagship company (Maxis Malaysia). It is a more strategic role and is a different league of opportunity. I’ll support the India operations in terms of strategy.’

Sandip Das, the second in command at Hutchison, announced his resignation after spending more than 13 years with the Hutchison group. He was the first employee of Hutchison Essar in India. Prior to that, he looked after the paging business as chief executive of Hutchison Max Telecom’s paging division since 1993, when he returned to India after an overseas stint.

There has been some reorganisation within Hutchison in the reporting structure. Harit Nagpal, CMO and Steve Correa, director, HR, now report to MD Asim Ghosh while the operational directors (who look after clusters of circles) report to CFO, Chris Foll.

I’m in Hong Kong attending the 3G World Congress this week. Mobile Pundit updates will be slow, and will catch up with Indian mobility developments over the weekend.