There’s good news for new telecom entrants such as Swan, Unitech, Datacom and Shyam, among others, on the rollout obligation front. The department of telecommunications (DoT) is likely to link the time frame by which these telcos have to launch services in pre-determined geographical areas to the “date of allocation of spectrum’ and not the ‘date of issue of licence”. This issue may be discussed by the telecom commission during its meeting this week. If this change is made to the existing policy, companies like Swan Telecom, Datacom Solutions, Unitech or Shyam Telelink, which were issued licences by DoT on January 25, 2008, will no longer be bound to meet their initial rollout obligation by January 25, 2009, as required under the existing telecom guidelines. Instead, as these companies were allotted initial chunks of airwaves (spectrum) only in May 2008, they will get four more months to meet their initial rollout obligations. However, it remains to be seen if these telcos can meet the May 09 deadline as none of them have set up even a single tower till date. Under the current norms, any player who gets the government’s nod to launch mobile services must ensure that the company’s services are available in least 10% of the districts in that circle or area within the first year of obtaining the licence, and 50% of the districts within three years of the effective date of licence. |
Wednesday, November 12, 2008
New telcos may get rollout relief
Telecom Commission clears 3-yr lock-in, 3% fee on 3G
The Telecom Commission, the highest decision-making body of the communications ministry, on Tuesday approved the department of The decision, however, will not impact the Unitech Telecom-Telenor deal and wan-Etisalat tieup. This because the lock-in will apply only in the case of sale of promoter equity and not when investment is brought into the company by a strategic investor by subscribing to fresh equity. The commission also cleared the 3% (of aggregate revenue) spectrum usage charge on new telcos that will offer third-generation (3G) mobile services. Existing telcos entering the 3G space will have to pay an additional 1% of their aggregate revenues as 3G usage charge. At present, telcos such as Bharti Airtel, Vodafone Essar and Idea pay 2-6% as user charge, depending on the amount of spectrum they hold, for 2G services. According to the DoT official, the commission also endorsed a 1-2% hike in the usage charge for 2G spectrum, or airwaves on which telecom signals travel. The hike will be a flat 1% for telcos that hold up to 8 MHz of spectrum. Beyond this limit, the charges would go up by a flat 2%. The new charges will be effective from January 1, 2009. This means, an operator with 4.4 MHz of spectrum in a circle will have to pay 3% of its total revenues as usage charges, up from 2% at present. And an operator who holds 10 MHz of airwaves will have to shell out 6% of its revenues towards spectrum usage charge, up from 4% at present. The hike in 2G spectrum charges will translate to over Rs 1,000 crore of additional levies for the exchequer, from all operators combined. Since telcos’ revenues are rising, this levy will only go up. The Telecom Commission, however, did not take a decision on the DoT proposal for imposing a one-time fee on GSM operators who hold 2G radio frequencies beyond 6.2 MHz. A positive decision would have impacted Bharti Airtel, Vodafone and Idea. “The proposal was considered, but we did not take a final decision on this. It has been deferred for a period of 15 days as both the Planning Commission and the department of industrial policy and promotion want to send their inputs,” a DoT official said. |
Declining ARPUs pressure margins of telecom cos
Average revenue per user (ARPU) linked to voice services, which comprises 80 per cent of the earnings for wireless telecom operators has This development has occurred for the last four consecutive quarters for leading wireless operators like Bharti Airtel, Reliance Communications, Tata Teleservices, Idea Cellular, all witnessing a dip in their ARPUs. For instance, country's leading operator Bharti Airtel is adding more than 1 million new subscribers every month but the increasing subscriber base is not resulting in increase of usage, as 50 per cent of its incremental subscribers are first time users from rural areas who will take time to increase the usage. “On the revenue front, growth is clearly slowing down with higher base and more importantly a consistent fall in ARPU, the topline growth has trailed subscriber base and will do so in forseeabale future,” Harit Shah, analyst at Angel Broking tracking telecom sector, said. According to an industry estimate, ARPUs are expected to fall from Rs 275 in FY2008 to Rs 238 in FY2011E, a CAGR decline of 4.7 per cent. Overall industry revenues to grow from Rs 68,896 crore ($17.2 billion) in FY2008 to Rs 1,42,761 crore ($34 billion, assuming a Rupee rate of 42 to a dollar) in FY2011E, a CAGR growth of 27.5 per cent over the period, led by strong subscriber accretion. “With declining elasticity of demand, a rise in MoUs commensurate with falling tariffs is also unlikely to materialise. Further, competitive intensity shows no signs of abating, rather it is only likely to get heightened with newer operators rolling out services and a further price war possible,” an analyst with Khandelwal Securities said. Considering the fact that Indian telecom market is growing at 53 per cent annually and only 27 percent of the total population is covered, there is possibility of doubling that growth in next five years, which will mostly take place in rural areas and hence there will be pressure in margins due to the fall in ARPU. This is the biggest challenge telecom companies face today to maintain their ARPU levels with most of the new subscribers getting added in the rural areas. Analysts said that in the rural areas, the usage level is low and will contribute to the fall in ARPU. Pradeep Srivastava, CMO of Idea, said, “The fall in ARPU is area of concern for us in near future but when you are going for market expansion where growth opportunity is enormous this will even out in longer run”. To scale down the effect wireless operator are looking at increasing their value added service revenue. “For instance, in China 25 percent of operator revenue comes from VAS in Philippines its 55 percent whereas in India its only 10 per cent, so there lies huge growth potential in this domain for wireless operator,” Srivastava added. |
Thursday, November 06, 2008
3G Spectrum Licenses: My view
A recent news item in the ET stated that the department of telecom (DoT) had decided that those companies that have the 2G licenses would be required
to pay an “acquisition fee equivalent to the value of the entire company if they sell 50.1% or more. The market value of the company will be determined by the government on the basis of the radio frequencies held by the telco and will not be less than the price at which the deal has been struck”. This approach raises a number of questions: The decision of the DoT was obviously in response to the issues raised by the recent Swan deal. As stated by a number of people in the media, the Swan deal allowed the company to pocket the entire gains due to the fact that it had got spectrum. The gains from this deal should rightfully have gone to the citizens through the government. The government chose to allow a private company to benefit at the expense of the public. Etisalat, a UAE-based operator had acquired 49% stake in Swan for $ 1.3 billion. It may be recalled that Swan had recently acquired a pan India Unified Access Service License (UASL) for Rs 1,650 crores ($0.4billion). It was awarded 4.4+4.4 MHz spectrum for operations in 13 service areas including Delhi. At the time of acquisition, Swan had no business operations. So, the only resource it had was spectrum. This spectrum was at a fixed price (fixed in 2001), and not in auction. An auction would have allowed the government to arrive at the market valuation of the spectrum. If the government chose an appropriate method of spectrum pricing and allocation, then the prices that companies would pay for it would reflect the value of the spectrum. In the current regime, the Rs 1,650 crores for a pan India license was based on the price of spectrum auctioned in 2001. Subsequent technological developments and availability of services in several new bands has made spectrum much more valuable. A simple mechanism of a lock-in period linked to roll outs etc could have ensured that companies that get spectrum actually roll out services. Otherwise, it is the old permit raj, where those who can grab and sell the licenses at profits far in excess of the business risk, with little or no risk. Since in the current regime services licenses are tied to spectrum licenses the whole issue of how much is the associated spectrum worth becomes difficult to address.
to pay an “acquisition fee equivalent to the value of the entire company if they sell 50.1% or more. The market value of the company will be determined by the government on the basis of the radio frequencies held by the telco and will not be less than the price at which the deal has been struck”. This approach raises a number of questions: The decision of the DoT was obviously in response to the issues raised by the recent Swan deal. As stated by a number of people in the media, the Swan deal allowed the company to pocket the entire gains due to the fact that it had got spectrum. The gains from this deal should rightfully have gone to the citizens through the government. The government chose to allow a private company to benefit at the expense of the public. Etisalat, a UAE-based operator had acquired 49% stake in Swan for $ 1.3 billion. It may be recalled that Swan had recently acquired a pan India Unified Access Service License (UASL) for Rs 1,650 crores ($0.4billion). It was awarded 4.4+4.4 MHz spectrum for operations in 13 service areas including Delhi. At the time of acquisition, Swan had no business operations. So, the only resource it had was spectrum. This spectrum was at a fixed price (fixed in 2001), and not in auction. An auction would have allowed the government to arrive at the market valuation of the spectrum. If the government chose an appropriate method of spectrum pricing and allocation, then the prices that companies would pay for it would reflect the value of the spectrum. In the current regime, the Rs 1,650 crores for a pan India license was based on the price of spectrum auctioned in 2001. Subsequent technological developments and availability of services in several new bands has made spectrum much more valuable. A simple mechanism of a lock-in period linked to roll outs etc could have ensured that companies that get spectrum actually roll out services. Otherwise, it is the old permit raj, where those who can grab and sell the licenses at profits far in excess of the business risk, with little or no risk. Since in the current regime services licenses are tied to spectrum licenses the whole issue of how much is the associated spectrum worth becomes difficult to address.
Bharti Telesoft to deploy VAS solutions for South Africa’s MTN
According to the deal, the transaction will find Bharti Telesoft provide MTN with SMSC, including its SMS Router and mGateway solutions, as well as MMSC and WAP Gateway solutions.
Bharti Telesoft, a provider of Value Added Services (VAS) and Business Support Systems (BSB) to telecom operators, has inked an agreement with South African telecom major MTN Group, to deploy Multimedia Messaging Center (MMSC), Short Message Service Center (SMSC) and Wireless Application Protocol (WAP) Gateway solutions to all 21 operations of MTN cross-wide.
Bharti Telesoft, a provider of Value Added Services (VAS) and Business Support Systems (BSB) to telecom operators, has inked an agreement with South African telecom major MTN Group, to deploy Multimedia Messaging Center (MMSC), Short Message Service Center (SMSC) and Wireless Application Protocol (WAP) Gateway solutions to all 21 operations of MTN cross-wide.
According to the deal, the transaction will find Bharti Telesoft provide MTN with SMSC, including its SMS Router and mGateway solutions, as well as MMSC and WAP Gateway solutions. Bharti has gained compency on this front post acquisition of Jatayu Software.
While commenting on the deal, Sai Prabhu, VP Key Accounts, Africa, Bharti Telesoft said, “MTN is a prestigious client for Bharti Telesoft and we are thrilled to be strengthening our relationship with the group via this major win. We are looking forward to enabling enhanced interactivity among all segments of MTN’s broad subscriber base, including both novice and advanced users of messaging value added services.
Furthermore, MTN Group Chief Operating Officer Mr. Sifiso Dabengwa added, “Bharti Telesoft’s value added solutions are already running successfully in various MTN Operations and we believe this suite of messaging solutions will stimulate increased usage and encourage greater interactivity among new and existing subscribers as well as enhancing the overall service experience.”
While commenting on the deal, Sai Prabhu, VP Key Accounts, Africa, Bharti Telesoft said, “MTN is a prestigious client for Bharti Telesoft and we are thrilled to be strengthening our relationship with the group via this major win. We are looking forward to enabling enhanced interactivity among all segments of MTN’s broad subscriber base, including both novice and advanced users of messaging value added services.
Furthermore, MTN Group Chief Operating Officer Mr. Sifiso Dabengwa added, “Bharti Telesoft’s value added solutions are already running successfully in various MTN Operations and we believe this suite of messaging solutions will stimulate increased usage and encourage greater interactivity among new and existing subscribers as well as enhancing the overall service experience.”
Wednesday, November 05, 2008
Steve Jobs: King Of Cash
How much cash does Apple have? So much that even the hard-bitten investment analysts who cover the company for a living are sometimes in awe.
With automakers, insurance companies and banks going to the U.S. government and begging for bailout money, Apple Chief Executive Steve Jobs took a moment during last month's earnings conference call to call attention to his company's massive $24.5 billion pile of cash and short-term investments.
"I think you could hire almost every engineer in Silicon Valley on a lifetime employment contract and not really dent that significant cash horde that you have," Bernstein Research senior analyst Toni Sacconaghi said on the earnings call.
"There's going to be some significant opportunities," Jobs replied dryly. "I think hiring every engineer in Silicon Valley is a good idea, though. Thanks."
The bottom line: Jobs is the king of cash, he can do anything.
Of course, when just measuring cash and cash-equivalents, computer and printer giant Hewlett-Packard has more in the bank. But when you add in short-term investments, HP's total hoard is $14.8 billion compared to Apple's $24.5 billion.
So what will Jobs do with enough money to buy Japanese consumer electronics giant Sony? Apple is already making acquisitions, albeit judiciously. In April, the Cupertino, Calif.-based computer and gadget maker spent $278 million in cash for chip designer PA Semi. Jobs has said the PA Semi team will be designing silicon for Apple's iPods and iPhones. And with the tech downturn deepening, Apple can use cash to scoop up as many start-ups as it needs.
A stock buyback is another possibility. Despite surging sales of iPhones and Macintosh computers, Apple's shares have fallen nearly 50% this year. Apple's pile of cash and short-term investments now represents a third of its market capitalization. With Apple cranking out roughly $8 billion in cash each year, Apple can certainly afford it. "We believe a share repurchase represents the best use of, at least part of, Apple's [roughly] $25 billion in cash," Bernstein's Sacconaghi said in a note to investors last month.
Instant Think Tank: What should Apple do with its $24.5 billion in cash and short-term investments? You tell us. Share your thoughts in the Reader Comments section below.
Others, however, argue that with finance growing tight, thanks to the collapse of Lehman Brothers and the bail out of the nation's banks, sitting tight is the right thing to do. "I'd sit there with all my cash," says Roger Kay, president of Endpoint Technologies Associates. "The guys with the cash--banded bundles of 100 dollar bills--are in the best shape of all."
Apple, of course, is one of many tech companies with large cash piles. The key difference: Other tech companies have been more diligently spending their money on stock buybacks and acquisitions. IBM, HP and Oracle have all been snapping up companies at a steady pace. Says Crawford Del Prete, an executive vice president at tech tracker IDC, "These companies are trying very hard to fill cracks in their portfolios so they can capture more of the value in their customers' spending,"
With automakers, insurance companies and banks going to the U.S. government and begging for bailout money, Apple Chief Executive Steve Jobs took a moment during last month's earnings conference call to call attention to his company's massive $24.5 billion pile of cash and short-term investments.
"I think you could hire almost every engineer in Silicon Valley on a lifetime employment contract and not really dent that significant cash horde that you have," Bernstein Research senior analyst Toni Sacconaghi said on the earnings call.
"There's going to be some significant opportunities," Jobs replied dryly. "I think hiring every engineer in Silicon Valley is a good idea, though. Thanks."
The bottom line: Jobs is the king of cash, he can do anything.
Of course, when just measuring cash and cash-equivalents, computer and printer giant Hewlett-Packard has more in the bank. But when you add in short-term investments, HP's total hoard is $14.8 billion compared to Apple's $24.5 billion.
So what will Jobs do with enough money to buy Japanese consumer electronics giant Sony? Apple is already making acquisitions, albeit judiciously. In April, the Cupertino, Calif.-based computer and gadget maker spent $278 million in cash for chip designer PA Semi. Jobs has said the PA Semi team will be designing silicon for Apple's iPods and iPhones. And with the tech downturn deepening, Apple can use cash to scoop up as many start-ups as it needs.
A stock buyback is another possibility. Despite surging sales of iPhones and Macintosh computers, Apple's shares have fallen nearly 50% this year. Apple's pile of cash and short-term investments now represents a third of its market capitalization. With Apple cranking out roughly $8 billion in cash each year, Apple can certainly afford it. "We believe a share repurchase represents the best use of, at least part of, Apple's [roughly] $25 billion in cash," Bernstein's Sacconaghi said in a note to investors last month.
Instant Think Tank: What should Apple do with its $24.5 billion in cash and short-term investments? You tell us. Share your thoughts in the Reader Comments section below.
Others, however, argue that with finance growing tight, thanks to the collapse of Lehman Brothers and the bail out of the nation's banks, sitting tight is the right thing to do. "I'd sit there with all my cash," says Roger Kay, president of Endpoint Technologies Associates. "The guys with the cash--banded bundles of 100 dollar bills--are in the best shape of all."
Apple, of course, is one of many tech companies with large cash piles. The key difference: Other tech companies have been more diligently spending their money on stock buybacks and acquisitions. IBM, HP and Oracle have all been snapping up companies at a steady pace. Says Crawford Del Prete, an executive vice president at tech tracker IDC, "These companies are trying very hard to fill cracks in their portfolios so they can capture more of the value in their customers' spending,"
Subscribe to:
Comments (Atom)