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The Supreme Court (SC) verdict that the Comptroller and Auditor General of India (CAG) can audit the revenue receipts of private companies that utilise national resources has literally set the cat among the pigeons. The SC passed the order on a batch of petitions filed by telecom associations challenging a Delhi High Court verdict which had given the green signal for the CAG to audit the accounts of telecom operators. Currently operators pay between 6 and 8 per cent of their revenues as licence fees. In addition, they pay 3-8 per cent of revenues as spectrum usage charges, depending on how much spectrum they use. The aim of the judgement was primarily to ensure that private companies are giving a correct share of their revenue to the government. While that is laudable, this could well be the tip of the iceberg. The broad sweep of the SC verdict means that private industry that uses any kind of national resource can now be audited by the CAG. Private companies in oil & gas, power, mining, roads, ports, airports could well be audited by CAG in the future. That could also be extended to cover all projects that come under the public private partnership (PPP) model. On the other hand, tomorrow government could seek to check if private companies are paying their excise duty and income tax as prescribed. That could well be a case of more government, which could in turn make doing business in India all that more difficult. Read Also: Pvt Cos Including Telcos Under CAG Ambit: SC That means some of the biggest Indian corporations, including the Reliance group, Tata Power, Essar Oil, Adani Power, GMR and GVK among others could come under the purview of the CAG. Considering that the decision has been taken by the SC, it is unlikely that this will change. One way out would be to seek a review petition in the SC. While it puts pressure on industry to clean up, it will be a stress point for the CAG too. According to the CAG website, it “discharges his multifarious duties through the Indian Audit and Accounts Department. The department consists of about 50,000 employees and is functionally organised into 133 specialised formations throughout the country.” How many of these 50,000 employees can be deputed to audit private companies on a quarterly or annual basis remains to be seen. For that to happen, the CAG would need to streamline its operations to ensure that it can do timely audits where necessary. It remains to be seen whether the CAG actually goes ahead and audits some of the largest corporations or will it be just an eye wash. That clarity should emerge over the next few months. But for now, private industry and their auditors need to ensure that there are no black spots. anupjayaram@gmail.com
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As voice revenues have been stagnating, telecom operators have been focusing on raising data revenues. Now, Reliance Communications (R-Com) has slashed 3G data tariffs to 2G rates. In what is termed as a game-changing plan, R-Com subscribers can access 3G services at Rs 123 for 1 GB, Rs 246 for 2 GB and Rs 492 for 4 GB.But RCOM is doing only what Bharti Airtel and Vodafone did a couple of months ago. Bharti Airtel cut 3G data prices by 70 per cent in May. Vodafone slashed 3G tariffs by 80 per cent in June. Gurdeep Singh, President and Chief Executive Officer, Wireless, Reliance Communications Limited, said: “This is an inherent part of RCOM’s objective to take high-speed data services to every smart phone and tablet user in the country, without them worrying about incremental or high costs.”But will this make a difference to the data market? R-Com is reported to have 7.2 million 3G subscribers compared to Bharti Airtel’s 8.4 million and Vodafone’s 3.3 million. It remains to be seen how many current 2G subscribers move over to 3G services. Himanshu Shah, research analyst at HDFC Securities points out that RCOM’s rate reduction is unlikely to have a material impact on other telecom operators due to an inferior 3G network presence. While RCOM om has 11,000 3G BTS across 13 circles, Bharti Airtel has 25,000 and Idea Cellular has 17,000 across 11 circles. Since other operators have already reduced tariffs, it is unlikely that there will be another round of cuts. Read Also: Bharti Airtel Slashes 4G RatesOnly about 5 per cent of India's 850 million mobile users have subscribed to 3G services, which are estimated to account for 3 per cent of mobile revenue of telecommunication carriers.Uptake of the premium internet services has been slower than expected as a majority of mobile subscribers mostly use phones to make calls and also partly due to the high pricing of such services. anupjayaram (at) gmail (dot) com
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Petroleum minister M Veerappa Moily has categorically stated that there is no rethinking on raising gas prices starting April 1, 2014. "There is no thinking on part of the government for any review or reconsideration of the decision of the CCEA. Let me make it very clear. There is no confusion, there is no vagueness. And I don't think there is scope for any interpretation whatsoever," he said. Based on a formula suggested by the C. Rangararajan Committee, the cabinet panel approved pricing of domestically produced gas at an average of cost of imported LNG into India and international hub rates. Moily pointed out that the current price of gas based on that formula is $6.83 per mmbtu (million metric British thermal units). Consumers are currently paying $4.2 per mmbtu. The price in April 2014 will depend on what the market dictates then. As things stand, there is no price at $8.4 per mmbtu. “The price could be higher or lower than $6.83, depending on the market,” says a petroleum ministry official. The prices will be reviewed every quarter, based on the Rangarajan Committee formula for five years. The petroleum minister also clarified that there will be uniform pricing. What that means is that there would be no distinction between companies as far as gas pricing is concerned. Earlier it was reported that Finance Ministry has been pushing oil ministry for capping the gas price hike and maintaining old rates for some of the gas of Reliance Industries which it has failed to deliver during past three years at the current price of $4.2. Read Also: FinMin Asks Oil Min If Gas Price Should Be CappedRead Also: RBI Asks Oil Cos To Buy Dollars From Single BankRead Also: India's New Gas Price FormulaRead Also: Gas Price Hike Will Benefit Govt: Veerappa MoilyEver since the government decision was announced on June 27, there has been criticism that it was made to benefit Mukesh Ambani-led RIL. Finance Ministry on July 4 wrote to Oil Ministry asking it to take appropriate action on suggestions made in two media reports for putting a cap up to which rates can be raised, and RIL being forced to sell the quantity it had committed but failed to deliver in past three years at old rate of $4.2."The Office Memorandum dated July 4 from the Department of Expenditure, Ministry of Finance... has enclosed two editorials of the newspapers and illustrated some of the issues in these editorials. That cannot be taken as objective opinion of Ministry of Finance. It cannot (also) be considered as query raised by Ministry of Finance," Moily said. The Cabinet Committee on Economic Affairs (CCEA) had on June 27 approved pricing of domestic gas at an average of cost of imported LNG into India and international hub rates. The price of gas when this formula comes into effect on April 1 could come to about $8.4 per million British thermal unit. Moily said his ministry had taken opinion of Finance Ministry twice and it was incorporated in the CCEA note. "I don't think there is another interpretation open to it. It (the CCEA decision) has been done after due deliberation and I think it has taken lot of time and deliberations and once considered view has been taken, we will stick to that," Moily said. "The CCEA approved domestic natural gas pricing guidelines 2013 based on the methodology suggested by the Rangarajan Committee which will be applicable to all natural gas produced domestically and to all the consuming sectors uniformly," Moily said. Asked if RIL may be asked to sell some part of its KG-D6 gas at old rate of $4.2 per mmBtu, Moily said the CCEA decision will "apply on all natural gas produced domestically and all the consuming sectors uniformly". The Ministry of Finance in its July 4 note asked if RIL, which will be a big beneficiary of rates increase, be made to sell the quantity it has failed to deliver as per its own targets during past 3 years at current price of $4.2. "Once Reliance overcomes the 'technical difficulty' of producing gas at the KG-D6 field, the government must ensure the company delivers the shortfall it still owes at the old price of $4.2 rather than getting the benefit of the new price," it wrote. But for the first year of production, KG-D6 output was short of target since 2010-11 fiscal. Against the target of 62.1 million standard cubic metres per day in 2010-11, RIL produced 55.89 mmscmd. In the following year, it produced 42.65 mmscmd as opposed to a target of 70.38 mmscmd. Last fiscal, gas production of 27 mmscmd was way short of target of 86.73 mmscmd. Currently, it is producing 14.01 mmscmd as opposed to a target of over 86 mmscmd. (With input from agencies)
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The Ambani brothers — Mukesh and Anil — seem to have begun the process to settle their differences, at least in telecom. In the second deal in as many months, Mukesh Ambani-owned Reliance Jio Infocomm (RJI) has agreed to use 45,000 telecom towers of Anil Ambani-owned Reliance Communications (R-Comm) in a Rs 12,000-crore deal. Last time round, RJI had tied up with RCom in the Rs 1,200 crore deal for sharing inter-city optic fibre connectivity.There are enough reasons why this deal is important to both brothers.Read Also: RJIL, RComm Sign Telecom Tower Deal Suddenly, the business case for R-Comm has become all that better. The deal will help Anil Ambani retire some of the accumulated net debt of Rs 38,864 crore that R-Comm is saddled with. It will also provide a regular, clear fixed source of income for R-Comm that has seen net profit in FY 2013 fall 28 per cent to Rs 671.6 crore on revenues of Rs 21,778 crore.For Mukesh, it will help in a faster roll-out of broadband wireless access services. More importantly, three years after winning 20MHz of 2300MHz spectrum nation-wide, RJI has yet to launch services anywhere in the country. Meanwhile, Bharti Airtel which won BWA spectrum in 8 circles (including four that it acquired from Qualcomm later) has already launched services in Kolkata, Bangalore, Pune and Mohali. Another advantage that Mukesh has is that it was after all he who built that network before the brothers split.But one thing is clear, after going through tough times for well over a year the telecom sector is finally looking to get going all over again.
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It has been in the air for quite some time. A day after Mukesh Ambani stated at Reliance Industries annual general meeting that the group would invest $ 3 billion in telecom operations, Reliance Jio Infocomm (RJIL), and Reliance Communications (RComm) announced the signing of an agreement to share RComm's telecom towers infrastructure. Under the deal, RComm will get Rs 12,000 crore over the lifetime of the agreement. Reliance Jio Infocomm will use 45,000 telecom towers of RComm to roll-out its broadband wireless access services across the country. "The agreement provides for joint working arrangements to configure the scope of additional towers to be built at new locations to ensure deep penetration and seamless delivery of next generation services," said a press statement.This is the second deal that RJI has done with RComm over the past couple of months. In April, RJI had done a Rs 1,200 crore deal with RComm for an inter-city optic fibre sharing agreement. In between, RJI had also announced that it will utilize Bharti Airtel's i2i submarine cable that connects India and Singapore.So what does all this mean? The big gainer is no doubt RComm which is bogged down with a net debt of Rs 38,864 crore at the end of FY 2013. It will be a boost to RComm that had a net profit of Rs 671.6 crore on revenues of Rs 21,778 crore in the last fiscal. In 2011-12, RComm had notched profits of Rs 928 crore on revenues of Rs 20,382 crore. It remains to be seen how quickly RComm will be able to retire some proportion of its net debt.As far as RJI is concerned, it is quite clear now that it is following an asset light strategy. Instead of setting up its own infrastructure, it will use existing infrastructure. It remains to be seen if RJI will join hands with other tower companies too to increase its reach across the country.
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After discussing it for months, the Telecom Regulatory Authority of India (Trai) has stayed away from announcing free national roaming. It has announced a cut in national roaming fees though. That should provide cheaper connectivity to millions of subscribers while also providing relief to operators who had been worried that free roaming would dent their top line by approximately 10 per cent.It is not that operators cannot offer free national roaming. Trai has stated that operators can offer plans for roaming subscribers to opt for partially free roaming, or full free roaming for a fee starting July 1. So Special Tariff Vouchers which were earlier limited to within a circle would be permitted for roaming tariffs. That will enable service providers to customise tariffs for roaming subscribers.Even without paying a fee, roaming will become cheaper for millions of mobile telecom service users. Under the new tariffs, mobile-telephone users will pay Re 1 per minute for making a call, and Rs 1.5 per minute for receiving calls outside their telecom circle. Till now, subscribers were charged Rs 1.40 per minute for making calls, and Rs 2.40 per minute for receiving calls.Roaming charges are unique to India. Unlike other countries, India is divided across 22 telecom service areas (largely along state boundaries). Mobile service users of one service area have to pay additional charges for making or receiving calls and text messages, outside their home service area. Goldman Sachs terms the decision as balanced since it achieves the government objective of allowing free national roaming and does not materially impact telecom operator revenues. anupjayaram (at) gmail.com anup(dot)jayaram(at)abp9dot)in9at)anupjayaram
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The $2-trillion global telecommunications industry that is currently focusing on rising data revenues could be in serious trouble if the plans of global search engine Google fructify.Google launched Project Loon — it’s most ambitious project ever — from close to the scenic, 87 square kilometre Lake Tekapo near Christchurch, New Zealand. Project Loon aims to make planet Earth a single giant wi-fi spot. To do that Google has launched a small network of solar powered, high altitude balloons that will float 12.5 miles initially above New Zealand — about twice the height that aircraft fly today, but well below the path of satellites.By installing a red-colored device on the rooftop, users will be able to be connected all the while. It is something on the lines of televisions direct to home (DTH) connectivity. But the big difference is that this time round, Google will be in a position to cover the entire globe all by itself. What it means is that people in the remotest parts of the world could get uninterrupted connectivity.But this is where the game changes. Since Google will be operating on the unlicensed spectrum, it need not bid for expensive spectrum like telecom service providers. Two it does not need to take permissions from national telecom regulators. It will be in a position to provide internet connectivity quickly across the world.This move by Google could well be the death knell for the global telecommunications industry. While it will hit service providers immediately, it could over time pose a huge challenge to submarine cable companies and telecom vendors that cater to the optic fibre, telecom towers and equipment industry.As thing stand, each balloon is expected to provide connectivity to an area about double the size of New York City. Since the balloons will be at a high altitude, it will be able to provide connectivity in rugged terrains where telecom operators have desisted from entering all along due to high capital expenditure issues.Google has not mentioned anything about the cost of the project. But, the global telecom industry does have some time to find a Plan B. After all, it will take quite a few years for the globe to be covered with the Google balloons. That time could be critical, or the telecommunications industry as we know it today may simply not exist.But will the world want to rely on one service provider? Seem unlikely.anupjayaram (at) gmail.com anup(dot)jayaram(at)abp9dot)in9at)anupjayaram
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iYogi, a provider of remote technical support has launched a cloud computing platform, called Digital Services Cloud (DSC), that will allow companies and service providers to deliver their own remote management services.With DSC, telecom companies, OEM’s, technology retailers and BPO companies can address new opportunities and generate revenue, while enhancing customer experience and reducing costs. The DSC would allow customers to utilise the iYogi support network in their own services. It will allow enterprise and home service providers to offer in-house branded support for end-user PCs. Says Vishal Dhar, co-founder and president (marketing), iYogi: “DSC has the capability to increase customer lifetime and value. It allows telcos, technology retailers, and BPO to expand their business by adding technical support services.”The cloud service is in response to demand the company has seen from partners to open up various components of the iYogi support network, which utilises a combination on locally-installed software and a remote support network to allow technicians to diagnose and repair systems through the cloud. iYogi has over 2.5 million users, and has serviced more than 13 million technical support incidents in the last six years.
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From crude to coal, cheaper commodities augur well for both government and industry.Click Here To View Graphic: Prashant Chaudhary(This story was published in BW | Businessworld Issue Dated 20-05-2013)
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More than a third of the 4,013 candidates who contested the six state elections in the recent past declared assets of over Rs 1 crore. The affidavits filed with the Election Commission indicate a big chunk of the parliamentary aspirants too were from the crorepati club Click here to view graphicGraphic by Prashant Chaudhary(This story was published in BW | Businessworld Issue Dated 17-06-2013)
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