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A busy Friday evening at Inderlok, the interchange station for Delhi Metro’s red and green lines, sees hundreds of commuters thronging the precincts. Inderlok station is home to one of the 10-odd Parsvnath Metro Malls dotting the Delhi Metro. The 150,000-sq. ft property houses a Big Bazaar, a Comesum (a restaurant chain), ATMs of at least four banks, a McDonald’s, a Raymond’s store and a Delhi government-run wine & beer outlet. Surprisingly, while the station is a hub of activity, there are not many people at the stores. In the brightly lit Comesum on the ground floor, there are fewer than 10 customers. At Big Bazaar, trolleys are seen lined up on the sloping passageway to the upper floor, awaiting the elusive shopper. There are a few people in the store, but nothing compared to the rush you see at other Big Bazaar outlets. Only the McDonald’s outlet is busy. Outside the liquor store, of course, there is the weekend queue. Delhi Metro started setting up stores on the network for two key reasons. One, they help people do basic shopping while on their way home after a hard day’s work. Two, they provide the mass transit network an additional revenue stream. This is critical for a network that provides subsidised travel despite continued high capital expenditure. However, Delhi Metro’s plans to earn big money by providing retail avenues on the network seem to have come a cropper, at least for now. Nearly seven years after Delhi Metro started retail operations, they accounted for just Rs 40 crore in 2011-12, and are expected to touch Rs 45 crore in 2012-13. Of the Rs 40 crore, Rs 6 crore is from kiosks. The total non-fare revenues, including those from ATMs, cellphone towers, advertising and shops, add up to Rs 200 crore, accounting for a mere 15 per cent of the Delhi Metro’s total revenues. The original target was 25-30 per cent. In sharp contrast, for the Hong Kong MTR, the non-fare revenues in 2011 accounted for 36.8 per cent of a total of HKD 21,144 million (about $2,725 million). Apart from stores, the MTR has at least 12 shopping malls at stations, plus a luxury mall. While trying to replicate the global metro retail model is fine, bringing in the footfalls is a far more difficult proposition. That’s what Delhi Metro has discovered. Of the 145 stations on its network today, it has stores in 40. In 10 other stations, including Dhaula Kuan (on the Airport Express route), Badarpur, Vaishali and Chawri Bazaar, empty store slots abound. ON THE GO: Dufry International and InterGlobe Enterprises have a 15-year deal with Delhi Metro for operating Hudson News & Café outlets on the networkThe idea of setting up stores on the metro network was a good one to start with. A city on the move, with little time to spare, would want to shop quickly en route. The numbers supported this argument — over 2 million people use the Delhi Metro daily and, therefore, shops at metro stations would ideally cater to them. Says S.D. Sharma, director of business development at DMRC: “The demand for retail is not that good. We still have many shops that are vacant.” For instance, despite three tenders, there have been no takers for five floors of 3,000 sq. metres each at the HUDA City Centre station (the terminal station in Gurgaon). Only the ground floor has stores. “The offers that we get are far too low,” says Sharma. Says a retail consultant: “The culture of shopping on the metro network has yet to gain traction in Delhi.”Catchment AreaAmong the earliest entrants to try and cash in on the retail business on the Delhi Metro was Parsvnath Developers. Apart from setting up the malls, it was also involved in building two stations — Akshardham and Azadpur. Sharma adds that Parsvnath also has the advertising rights for the former. Yet, many of the proposed outlets, including a Haldiram’s, are yet to open shop at Akshardham. A retail consultant says that the presence of a host of vendors around the Akshardham temple premises could be the reason for the lack of interest in setting up stores at the station. Parsvnath also has a plot by the side of the Akshardham station. But this could not be developed as the property was sealed by the erstwhile Municipal Corporation of Delhi. It finally got the green signal from the Delhi lieutenant governor in 2010. While Parsvnath built stations and set up malls at others, Kishore Biyani’s Future Group moved in as one of the anchor tenants at some stations. In all, it has 23 outlets of different formats at or near metro stations — close to a dozen are within 500 metres of a metro station; and three Big Bazaar outlets (Inderlok, Netaji Subhash Place and Mayur Vihar Extension), two Food Bazaars (Rajendra Place and Rithala) and a Fashion Big Bazaar (Karol Bagh) are within stations. Says Puneet Jain, NCR zonal head at Future Value Retail, a Future Group company: “The coming of the metro has changed buying patterns in the city. We are well on target in the capital region.” While that could be true, according to an industry expert, the bulk of the revenues for the group is from stores that are located near, and not within, stations. That’s corroborated by people residing in the vicinity of a station. Deepa S., 35, a resident of Mayur Vihar, says: “While I commute on the metro, I do not shop at the station since we have a good market next door. Rarely do I pick up anything from the station outlet.” This is a big problem for retailers on the metro network. break-page-breakJain agrees that while purchases at Future Group stores on the metro are largely impulse driven, shoppers at malls are clear about what they want to buy. Arvind Singhal, chairman of Technopak Advisors, says, “Primarily, food, groceries and medicines really sell at stores on a metro network.” Stations in residential areas focus more on groceries and items of daily use; at stations in commercial areas, the demand is for reading material, quick bites and chewing gum. The one favourite service across stations is recharging of pre-paid mobile connections. In a way, while they cater to different markets, the stores at metro stations and malls complement each other — as footfalls increase over the weekend at malls, stores on the metro network see fewer customers. However, unlike mall outlets, metro stores haven’t been able to determine the socio-economic profile of commuters. Since a diverse set of people uses the metro, it is difficult for store operators to do a catchment analysis and identify potential customers. This makes it difficult for metro stores to cater to shoppers’ needs. But the advantage is that running a store at a metro station is much cheaper than at a mall. A 300-sq. ft space at a metro station would be available for a monthly rental of around Rs 50,000. At a mall, depending on location, it can cost anywhere from double upwards. NEW ROUTESDelhi Metro is giving out property for developmentRESIDENTIAL PROPERTY• Khyber Pass Depot• Dwarka Mor• Rithala• Subhash Nagar• Vishwavidyalaya• Janakpuri WestOFFICE COMPLEXHUDA City Centre (Gurgaon)Another company trying to tap the metro retail opportunity is Switzerland’s Dufry International (a global travel retailer with operations in 43 countries). It has joined hands with InterGlobe Enterprises (which operates IndiGo Airlines) to set up outlets of Hudson News & Café, which has 45 stores in LA International Airport and another 40 at JFK International Airport, New York. InterGlobe has a 15-year lease with Delhi Metro. The brightly lit outlets offer candy, chocolates, wafers, newspapers, magazines, romance and motivational literature and, of course, coffee. Of the 40 stores planned, 37 are up and running. Says Siddhanta Sharma, director at InterGlobe Retail: “Around 30 per cent of our stores on the Delhi Metro network are doing much better than expected, while another 50 per cent are matching expectations.” In some stations, the stores are located on the wrong side of the traffic, which is why about 20 per cent are performing below expectations. If 2012 was the year for opening outlets, this year is one for consolidation. InterGlobe plans to expand its reach to Gurgaon’s upcoming Rapid Metro network as well. It is also in talks with the developers of Mumbai and Bangalore metros. All expansion on other metro networks is likely to happen in 2014. Another player to have understood the model is the Indian Railway Catering and Tourism Corporation. Considering that quick and clean food is a need on transit networks, it is all set to open food kiosks — Food Track — at 130 stations. These will offer a variety of snacks and quick bites, including samosas, rolls and burgers. These kiosks will also serve meals in sealed trays that users can take home and heat in a microwave. Over To Plan BDespite all the activity in metro retail, it is advertising that accounts for the bulk of non-traffic revenues for the Delhi Metro —within and outside stations, and inside coaches. Retail income, at Rs 40 crore out of a total of Rs 200 crore from properties in and around metro stations, has not matched expectations. So, Delhi Metro is now looking at other means to earn more since it has already spent close to Rs 30,000 crore in setting up the first two phases of the network. The third phase will involve an additional capital investment of Rs 35,000 crore. ‘Around 30 per cent of our stores are doing better that expected’SIDDHANTA SHARMA, Director, InterGlobe RetailTo begin with, Delhi Metro plans to give station-naming rights to corporates. The first station that could be renamed is Sikanderpur in Gurgaon. The sponsor’s name will be included in the name. The Rapid Metro in Gurgaon, however, plans to go a step ahead — name a station entirely after a sponsor. The corporate will also get space at the station for advertising.The other move is to develop residential property and set up offices at metro stations. Currently, five plots have been set aside for housing. Parsvnath has started work at the Khyber Pass depot while AP Real Estate has begun work at Rithala. Other locations include Dwarka Mor, Subhash Nagar and Vishwavidyalaya stations. Delhi Metro has just kicked off the tendering process to lease out a 1.1-hectare (2.7 acre) plot at Janakpuri West station that is part of the third phase of the network to be completed in 2016. It is inviting bidders to set up a residential complex here. Like anywhere else, retail on the metro network, too, hinges on location. While the Comesum at Inderlok station is empty, the outlet on the concourse level of the Kashmere Gate station (the interchange between the red and yellow lines) is always packed. One, it is smaller, and two, it is bang in the middle of transit traffic. This could well be the way to get people to patronise Delhi Metro retail outlets. What could tilt things in favour of Delhi Metro is that India is short of basic retail and convenience stores, when compared to the West. As the Delhi Metro network almost doubles the present capacity by 2016, expect a lot more stores, and hopefully, more business. anup(dot)jayaram(at)abp(dot)inanupjayaram(at)gmail(dot)com(at)anupjayaram (This story was published in BW | Businessworld Issue Dated 20-05-2013)
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Near field communications (NFC) is now becoming a reality. Multiplex chain PVR has launched a PVR Wallet on the BlackBerry 10 platform. Developed by IT solutions company NEC India, users can buy tickets at PVR multiplexes across 15 locations by simply tapping their NFC enabled phone at the kiosks in the cinema hall premises. Users can also purchase food across in the cinema halls using the devices. Considering that the BlackBerry 10 platform is available only on the Z10, the usage will be limited for now. The app is available as a free download on the device. Considering that the BlackBerry Z10 comes for over Rs 43,000, the immediate usage is going to be limited. NEC is looking to offer the PVR Wallet for Android and Windows phones over the next three months. However, it will not work on the iPhone since it is not an NFC enabled device.What the user needs to do is load cash (up to Rs 5,000) into the wallet, before using the device. This is just one of the things that NEC India is doing to tap the Indian retail market. Zubair Alam, country head, NEC India points out that as usage increases, PVR will be in a position to figure out better that clientele that comes to their cinema halls. It already has close to a million people who visit the halls. With NFC, PVR will be able to send in customized campaigns to the regular users.There are other things that Alam is trying out in the retail space. One such experiment is happening at a quick service restaurant that specialises in sweets. Here, NEC is working on an application to digitise price tags. Once that happens, it will be possible for the restaurant chain to change prices for products across stores at the click of a button. The other application they are working on is mobile point of sale device. That will be used at the cosmetics counters at malls. It has been seen that women do not buy products half the time after getting a paper slip from the counter to make payments. So, the mobile device will generate the bill, so that the customer can make the payment there itself.
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Videocon Telecommunications Limited (VTL) is trying to do something that no other telecom service provider in the country has tried to do before. It plans to launch mobile broadband services using LTE (long term evolution) on the 1800MHz band by March 2014. All other operators are looking to launch broadband wireless services in the 2600MHz band.Videocon can do that since it has acquired liberalised spectrum in the November 2012 auction. That allows it to offer any kind of service—be it 2G, 3G, 4G or anything else. Unlike incumbent operators, the entire spectrum owned by Videocon is liberalised.Videocon whose licences were cancelled by the Supreme Court in February 2012 had already invested close to Rs 10,000 crore on the network. It won 5MHz of spectrum in six circles — Gujarat, Haryana, UP west, UP east, Bihar and Madhya Pradesh—for Rs 2,221 crore during the November 2012 spectrum auction. The initial focus of Videocon Telecommunications will be on these six circles which account for 46 per cent of the population. Barring Haryana and Gujarat, the teledensity in these circles is lower than the national average.What VTL is trying to do is not new. It is trying to replicate what some global operators including Australia’s Telstra and Deutsche Telecom among others have already done. The 1800 MHz band is dominant band for LTE network deployments. At least 58 operators, use 1800 MHz spectrum either as a single band system, or as part of a multi-band deployment, in 39 countries.As of end January 2013, VTL had 2.25 million subscribers across the six circles. “We are looking to be a pan-India player over the next two to three years, “ says says Arvind Bali, director & CEO, Videocon Telecommunications. VTL is collaboration with Ericsson and Nokia Siemens Networks to upgrade its existing network. Videocon expects to leverage the growth in 3G and LTE services over the next couple of years. According to a study, the 3G and LTE base is expected to exceed 120 million by 2015 from the current 20 million.However, the big question is whether there will be an ecosystem for LTE on the 1800MHz band. Many of the newer devices launched in recent times—iPhone 5, Samsung Note 2—can offer LTE on the 1800MHz band. However, the bulk of the devices are either routers or dongles. As a telecom consultant points out: It remains to be seen whether the company will be able to acquire subscribers willing to pay big money for an iPhone or Note2.”Videocon would start by offering 4G services in select areas of each circle. “We can always acquire more spectrum depending on future requirements,” Bali said. However, the success of the service will depend on the quality of the network and the possible solutions that people can use it for.
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Seva Ram shows no signs of fatigue, though it’s way past 11 pm. Or of winding up his handcart, snuffing out the petromax lantern and heading home. He sells paani-puri outside Saket station on Delhi Metro’s Yellow line. In early 2010, he hawked the same fare, but went home as early as 9.30 pm. In distant Savli, Vadodara, the third shift is hard at work at 2 am at the Bombardier plant. The 55,000 sq. metre covered production unit of the $18 billion Montreal, Canada-based company is an unending buzz of activity. Bombardier, contracted to supply the Delhi Metro Rail Corporation (DMRC) in mid-2007, has already made 614 rail cars for the Metro. The 400-odd employees at the 33 million euro (Rs 230 crore) facility are in a rush to meet delivery schedules, turning out one coach every day. The common thread between the two is the Delhi Metro. Though not the first — the Kolkata Metro started back in 1984 — its success has had a rub-off on many — big and small. The Delhi Metro covers 190 km as of now and is expected to be a 330-km grid when the third phase is completed in 2016. With an investment of Rs 30,000 crore so far and another Rs 35,000 crore on the current expansion, it has inspired many cities to embark on similar projects. While the Bangalore Metro is up and running, the first phase of Gurgaon’s Rapid Metro is slated to start in May this year. By 2016, it is estimated that close to 600 km of fresh Metro networks will be added across a dozen cities, including Mumbai, Chennai, Hyderabad, Pune, Ahmedabad, Jaipur and Kochi. “There is huge activity happening across the country in building Metro rail networks. The bids for the third phase of the Delhi Metro, Mumbai’s line 3, Bangalore’s phase II, Kochi and Ahmedabad will be finalised in 2013,” says Harsh Dhingra, chief country representative and whole-time director, Bombardier Transportation India. Click on the graphic for an enlarged viewTrain to India Not surprisingly, the Indian Metro rail market is the fastest growing globally after China, which already has a dozen cities connected and is rolling out networks in another 10. It is estimated that by 2020, the investment in Metro rail projects in India is likely to be in the region of Rs 200,000 crore ($ 40 billion). So, some of the biggest names globally in railways — coach manufacturers, tunnel boring machine (TBM) makers, signalling and train control systems, electromechanical components, contactless cards and token manufacturers — have laid their tracks to India for setting up manufacturing facilities as the action in the Metro rail market has, to a large extent, shifted out of developed markets. These manufacturers have created close to 7,000 direct jobs and around 15,000 indirect jobs. Bombardier set up the Savli plant in mid-2007. The plant delivered its first rail car to the Delhi Metro in June 2009. Bombardier chose Vadodara as it already had its propulsion equipment plant there. Bombardier is not the only one making Metro rail cars in India. At Sri City on the Tamil Nadu-Andhra Pradesh border, Paris-based Alstom has set up a 30 million euro Metro rail coach manufacturing unit that can roll out over 300 rail cars a year. It is from here that the company will supply cars to the Chennai Metro. And, in Bangalore, state-owned BEML, in collaboration with South Korea’s Hyundai-Rotem, has got an Rs 1,800-crore contract from L&T Hyderabad Metro for the supply of 171 cars. Our Savli plant is as good as any of our plants globally and is the first railway coach facility in India to use robotic welding”HARSH DHINGRAChief country representative & whole-time director, Bombardier Transportation India (BW pic by Tribhuwan Sharma)Meanwhile, Spain’s CAF (Construcciones y Auxiliar de Ferrocarriles), the world’s fourth-largest railway car manufacturer, is scouting to set up a Metro rail car plant in the country after it bagged an order for 84 coaches from the Kolkata Metro. Says Sanjiv Rai, MD, Rapid Metro Gurgaon: “For international vendors to compete in the domestic market, they need facilities here. As manufacturing is cheaper, they are in a position to win more orders.” Metro rail car plants are usually set up after companies bag large contracts. Says Dhingra: “Our plant here is as good as any of our plants globally and is the first railway coach facility in India to use robotic welding.” Jojo Alexander, managing director, Alstom Transport India, says: “Apart from supplying rail cars, we are doing a significant part of the signalling business from India.” While these plants meet domestic demand, they also help India take a crack at the global market. Alstom’s Alexander points out that apart from India, there are opportunities for steel Metro railway cars in Thailand and the Middle East. Bombardier is already supplying semi-finished Metro coaches to Adelaide, Australia. The More the MerrierThe Metro juggernaut does not stop at rolling stock. Since a coach has close to 50,000 components, the rail car manufacturers need a steady supply of parts. Over the years, many component makers have set up shop in the country. They include France’s Faiveley Transport Rail Technologies (brake assembly, brake kits, air-conditioning systems, pantographs); Germany’s Schlatbau (electro-mechanical components); and Japan’s Asahi Glass. Faiveley has set up its plant at Hosur, near Bangalore. Says D. Kumar, executive director, Faiveley Transport Rail Technologies India: “We are already looking to expand our operations. We plan to start door manufacturing out of India soon.” break-page-break The action is not just restricted to building Metro rail cars and their components. The Alstom Transport Software Development Centre in Bangalore supports global R&D and product engineering activities. Says Alexander: “Signalling is a significant part of Metro rail operations. The train control and protection systems in the DMRC ensure that the driver has to only close the doors.” While Alstom has been in India for a while, France’s Thales has recently bagged the Rs 740-crore contract for providing communications-based train control (CBTC) and integrated communications and supervision (ICS) systems for the Hyderabad Metro. Says Reynald Seznec, senior VP, international, Thales: “As the growth areas are shifting, we need to be present in areas outside of Europe. As part of that, we would like to do more local R&D in India.” Bombardier too has been active in the signalling area—it has done work on 39 km of Delhi Metro’s lines 5 and 6. But, much before a Metro rail car starts moving, the infrastructure has to be in place. That is where TBMs come in. To cater to their rising demand, Germany’s 1 billion euro Herrenknecht has set up a facility on the outskirts of Chennai. It has, till date, supplied close to 75 per cent of the 40-odd TBMs used in India’s Metro rail projects. Herrenknecht is the only TBM maker present in India. For an underground rail network, security is critical. That’s where Sweden’s Gunnebo comes in. It supplies the turnstiles. Says Per Borgvall, president and CEO, Gunnebo: “There is a security need for airports, Metro systems, the railways, power plants and important buildings in India, which will continue to grow.” Local FlavourBut to cross the turnstile at a Metro station, commuters need either contactless tokens or magnetic cards. This brings in smaller Indian companies. Brothers Alok and Puneet Kapoor invested close to Rs 10 lakh to set up their radio frequency identification (RFID) venture — APK Identification (APK-ID) — at the Noida Special Economic Zone. It bagged the global tender to supply contactless tokens for the Delhi Metro in 2005. APK-ID brought down the price of a token — originally supplied by Japanese companies — from Rs 240 to Rs 15. Today, APK-ID supplies close to 3 million tokens annually to Delhi Metro. Says Puneet Kapoor, partner, APK-ID: “We are looking to bag contracts from other Metro systems as they are set up.” Another local player, Mumbai-based Seipmann’s Card Systems, makes magnetic cards. APK-ID is not the only home-grown company to ride the Metro manufacturing bandwagon. There are many small suppliers of components that include lights, glasses and track fittings. One such company is Delhi-based Sidwal Refrigeration that supplies roof-mounted air-conditioning units for Delhi Metro rail cars. There is also VAE-VKN, a joint venture between Europe’s VAE and Sonepat’s VKN Industries, that supplies railway track systems. Hot on the tail of the manufacturers are some of the world’s largest infrastructure consulting, technical and management support services firms. These include New York-based Parsons Brinckerhoff that is involved in the Gurgaon and Delhi Metros and AECOM, which did the concept plan for Gurgaon’s Rapid Metro. “Apart from supplying rail cars, we are doing a significant part of the signalling business from India” JOJO ALEXANDER Managing director, Alstom Transport India (BW pic by Sanjay Sakaria)Resurgent RealtyBesides spawning a manufacturing ecosystem, the Metro network has given a huge fillip to real estate as well. As a result, many areas that were once considered outlying, such as Dwarka in south-west Delhi, have seen property prices rise with the launch of Metro services. Says Rai: “Cyber City in Gurgaon has close to 25 million sq. ft of property. There is bound to be an impact on property value and rentals as connectivity improves with the arrival of the Metro.” Adds Manish Kashyap, managing director, transaction services, CBRE: “Today, when corporates are relocating, the first question they raise is ‘how far is it from the nearest Metro station?’” Builders are also using proximity to proposed Metro lines to advertise their properties. “They are attracting investors looking for price appreciation 3-4 years down the road,” adds Kashyap.The expanding Metro network requires a talent pool. To create one, former DMRC managing director E. Sreedharan tied up with the Indian Institute of Technology, Delhi, to start a one-year specialised course in Metro technology. Larsen & Toubro (L&T) too has set up a facility in Hyderabad to train people. Says Vivek B. Gadgil, chief executive and managing director, L&T Metro Rail Hyderabad: “We provide basic training in rail systems.” These are early days. The action in the Metro space is not expected to die down anytime soon.anup(dot)jayaram(at)abp(dot)in(This story was published in Businessworld Issue Dated 11-03-2013)
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After a brief lull, Indian telecom operators are getting set for the next round of auctions in the 900/1800MHz and 800MHz bands starting 11 March. Unlike the November auctions, where there was no bidding activity in Delhi and Mumbai, this time round the focus will be in the two metropolises. These circles will see bidding for 15MHz (12 blocks of 1.25MHz) of spectrum each in both the 900MHz and the 1800MHz bands.The 900MHz auctions could ensure that the government comes close to its Rs 40,000-crore target from telecom auctions this fiscal. At the base price alone, the 900MHz in Delhi, Mumbai and Kolkata will yield Rs 25,317 crore. With the Rs 9,407 crore the government has already received from the November auctions, it works out to a neat Rs 34,724 crore. Even if operators pay just a third, it works out to Rs 11, 575 crore this fiscal.While the 900MHz band is part of the re-farming exercise, the 1800MHz spectrum is on offer since there were no bidders in the November 2012 auctions. Since then, the government has reduced the base prices by 30 per cent. Also on offer is 12.5 MHz (10 blocks) of 900MHz spectrum in Kolkata and 13.75MHz (11blocks each) of 1800MHz spectrum in Karnataka and Rajasthan which did not get bidders in November.Activity in Delhi and Mumbai is assured as licences in these circles are up for renewal in end-2014. For operators who are looking to renew their licences — in the 900MHz band — there is not much of an option. It remains to be seen if there are any new bidders. The base price for one block of 1.25MHz of 900 band spectrum in Delhi is Rs 970.3 crore. It is Rs 949.8 crore for Mumbai and Rs 227.4 crore for Kolkata.Read Also: 2G Auction Ends, Govt Collects Rs 9,800 CrRead Also: SC Brings 2G Scandal To NDA DoorSo will there be bids at this price? The incumbents — Vodafone, Bharti Airtel and Loop Mobile — need to bid to retain the 900MHz spectrum. Currently Vodafone has 8MHz of 900 band spectrum in all three cities; Bharti Airtel has 8MHz in Delhi and 6.2MHz in Kolkata while Loop Mobile has 8MHz in Mumbai. Says a telecom industry official: “Bharti and Vodafone do not have much of a choice. They need to bid, since these are key circles for them.”But there are still issues over the lowered base price for 1800MHz spectrum. An industry official argues that if the price of 800MHz could be lowered by 50 per cent since there were no bidders, then the same should apply to 1800MHz. Some operators are planning to approach DoT for redressal soon. Telewings (the joint venture of Norway’s Telenor and Sudhir Valia's Lakshdeep Investments & Finance Pvt Ltd) could emerge as one of the bidders for 1800MHz band spectrum in Mumbai. Says Hemant Joshi, partner, Deloitte, Haskins & Sells: “We are in a very unpredictable situation as the sector is stressed, balance sheets are over-leveraged and on top of it is policy uncertainty. In such a situation, it remains to be seen whether there is a business case at the reduced base price.”Meanwhile, the 800MHz band is likely to see selective bidding by Sistema Shyam Teleservices Ltd. As things stand it looks unlikely that SSTL will go in for nationwide bidding, but could focus on a handful of high-income circles.
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With the union bud-get not too far away, the government has started taking steps to raise resources and stem the deficit. It has virtually deregulated diesel prices, allowing oil marketing companies to hike prices slowly — 45 paise a month. The staggered hikes should help cut the under recovery on diesel that stood at Rs 9.60 a litre prior to the hike. Bulk consumers will now have to pay market prices. In another move, it halved the base price for the auction of 5 MHz of CDMA spectrum in the 800 MHz band to Rs 9,100 crore. Expect bidders for CDMA spectrum in the March auctions as opposed to November 2012 when there were no bidders. The key contender is Sistema ShyamTeleservices that had 21 licences cancelled last February. But, it remains to be seen if any bidder will seek spectrum across the country. Since operators need to pay only a third of the bid amount this fiscal, the numbers are not going to be big. Yet, every rupee earned today is important to the finance ministry that wants to meet the fiscal deficit target.Strictly BusinessBharat Heavy Electricals will soon be a Maharatna company. The status will, among other benefits, permit it to establish JVs, wholly-owned subsidiaries and undertake mergers and acquisitions subject to a ceiling of Rs 5,000 crore(This story was published in Businessworld Issue Dated 28-01-2013)
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Nordic telecom operator Telenor is reportedly in talks with Tata Teleservices (TTSL) for combining their mobile service operations. The combined entity is likely to emerge as India’s fourth largest telecom service provider in subscriber terms (120 million), overtaking Idea Cellular which has 115 million subscribers as of end-September.But, the possible merger will depend on whether Japanese telecom major NTT DOCOMO which has a 26 per cent decides to exit TTSL.The merger is important for Telenor which is looking to expand its presence in emerging markets. In the first three quarters of 2012, the India unit has performed the best recording a 39.5 per cent increase in revenues at 2905 million Norwegian kroner. The other growing markets are Pakistan (15.2 per cent), Thailand (13.6 per cent) and Malaysia (10.5 per cent). In at least five markets including Denmark, Hungary and Serbia, Telenor has recorded a fall in revenues. In its home market, Norway (18987 million kroner), Telenor recorded a marginal 1.1 per cent increase in revenues. Therefore, being present in India is important for Telenor.As a telecom industry official says, the Tata venture provides a level of comfort for Telenor, as it was looking for a safe partner in India. The venture with Tata Teleservices means that there will be no excess spectrum charges to be paid, since TTSL has only 4.4MHz of 1800MHz spectrum across the country. The only circle—Delhi—where TTSL did not have spectrum has also been cleared recently.The Norwegian group has had business ties with the Tata Group including a global IT services venture with TCS. It has also set its BTS on towers from Viom Networks, a joint venture between Tata Teleservices and Srei Infrastructure. Unlike Telenor, TTSL offers both GSM and CDMA based mobile services.It is believed that Telenor is looking for a controlling stake in the venture. That will depend on whether NTT DOCOMO decides to stay on in the venture. Telenor has won rights to operate in six Indian zones in the recently concluded auction this month after its earlier permits were ordered to be revoked. With more than 900 million mobile phone customers, India's mobile phone market is second only to China.The crowded market, which boasted 15 players until the first half of this year, is ripe for consolidation, analysts have said, as competition and rising debt levels eat into profit margins.However, there have been few deals, mainly due to regulatory uncertainty and strict government rules on ownership and airwave holdings.A cabinet decision this month determined that companies buying a carrier that paid a low state-set price for airwaves must match a far higher price determined in a recent auction and pay the difference to the government.
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While graduating from the College of Business Studies, Delhi University, in 1990, Dhirendra Kumar discovered he had free time after classes. An avid collector of newspapers and magazines for nearly five years, Kumar used that time to put the publicly available information and data he had accumulated into neat Excel tables. After all, in a world before the Internet, mobile telephony and cable TV became the norm, access to information and data was primarily from the printed word.
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In its biggest investment ever, state-owned ONGC Videsh (OVL) has finalised an agreement for acquiring the 8.4 per cent stake of ConocoPhillips, a $237-billion entity, in the North Caspian Sea Production-Sharing Agreement (NCSPSA) — that includes the Kashagan field in Kazakhstan — for close to $5 billion. This is OVL’s second investment in Kazakhstan — the first was a 25 per cent stake in the Satpayev offshore block in 2011. Kashagan, in the shallow waters of the Caspian Sea, is said to be the most important oil discovery in the world, after Prudhoe Bay, Alaska, in 1968, and is reported to have 30 billion barrels of oil equivalent. However, the field is reported to be running eight years behind schedule. As things stand, it is likely to start production in March 2013. But before OVL acquires the stake, it needs approvals from the Kazakhstan government, including thepre-emption rights of the Kazakh government and other shareholders. The consortium partners include global oil majors Eni, Total, Royal Dutch Shell, ExxonMobil and KazMunayGaz (Kazakhstan’s state-owned oil firm), each with a 16.81 per cent participating interest, while Japan’s Inpex has 7.56 per cent. The partners have 60 days to exercise their pre-emption rights. Once approved, it is expected to add 1 million tonnes (mt) of oil annually to OVL’s annual production of 6.75 mt (2010-11). Says an official in the petroleum ministry on condition of anonymity: “The future of the Kashagan field is good. The delays it had faced are behind it. OVL will be part of the expansion of the field.” OVL’s investment will be funded from internal resources. That is mainly on account of ONGC having a cash and cash equivalent to the tune of Rs 20,914 crore as on 30 September this year. In a media release, Don Wallette, executive vice-president, commercial, business development and corporate planning at ConocoPhillips, said: “The sale of this quality asset is an important component of our ongoing strategic asset disposition program. We are pleased that ONGC Videsh recognises the value of this asset.” As on 30 September, the carrying value of the assets related to ConocoPhillips’ interest in Kashagan was approximately $5.5 billion. The proposed investment in Kazakhstan is almost double the investment that OVL has made in Sudan since 2003. In a written reply in the Rajya Sabha, minister of state for petroleum and natural gas Panabaka Lakshmi said that the total planned expenditure in various OVL projects in undivided Sudan till September this year was close to $2.6 billion. The Kashagan acquisition is important for OVL, which has been facing rising problems in Sudan ever since the country’s partition. Production was temporarily stopped in Sudan for 20 days in April this year because of the border conflict between Sudan and South Sudan. Whether this acquisition of the stake in ConocoPhillips is the right decision for OVL or not — considering the state-owned firm saw production fall at Imperial Energy in Russia, which it had acquired for $2.1 billion in 2009 — only time will tell.(This story was published in Businessworld Issue Dated 10-12-2012)
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It is the basic infrastructure to offer mobile services. In a telecom market that has been through turmoil, Bharti Infratel, the telecom tower unit of Bharti Airtel has come out with an initial public offer (IPO) with a price band of Rs 210-Rs 240. It is expected to raise between Rs 4,000 crore to 4,500 crore.The offering of 188.9 million shares or 10 per cent of Bharti Infratel (BIL) is by the biggest IPO in the country after the $ 3.5 billion Coal India IPO in 2010. The BIL issue includes a fresh issue of 146.2 million shares while four existing shareholders including Compassvale Investments Pte Ltd. (an indirect wholly owned subsidiary of Temasek Holdings Private Limited), GS Strategic Investments Limited, Anandale Limited and Nomura Asia Investment (IB) Pte Ltd. are selling 42.7 million shares.Bharti Infratel has 34,220 towers (as of end September 2012) and has a 42 per cent stake in Indus Towers 110,561 towers. The consolidated Bharti Infratel has 80,656 towers across the country. The Bharti Airtel shareholding in BIL will reduce from the current 86.09 to 79.8 per cent post the IPO. During 2011-’12, Bharti Infratel recorded revenues of Rs 9,597 crore with net profits of Rs 750.7 crore.Read Also: Bharti Infratel IPO Bank of America Merrill Lynch, JP Morgan, Standard Chartered, Deutsche Bank, HSBC, UBS, as well as India's Kotak Mahindra and Enam are advising Bharti Infratel on the IPO. The tower business has seen no IPO happen till now. In recent times there has been only one big tower deal—GTL acquired the 17,500 towers of Aircel for Rs 8,026 crore in 2010. That works out to valuing an individual tower at around Rs 4.5 lakh. Since then valuations of tower companies have fallen as new operators slowed down roll-out post the cancellation of licences.As a telecom industry official says: “When a large operator like Bharti Infratel looks to go public, it brings in a huge degree of confidence in the market.” That however remains to be seen.
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