News - Telecom

J S Sarma to be Trai chairman

TDSAT member J S Sarma is learnt to have been appointed new chairman of the Telecom Regulatory Authority of India (Trai). The order on Mr Sarma’s taking over charge as new Trai chief was issued after the appointment committee of Cabinet cleared his name, said a senior official in the department of telecom. The former telecom secretary will be taking charge as soon as he completes hearing some TDSAT cases. He will succeed Nripendra Misra, who retired on March 22, 2009. Currently, Trai member A K Sawhney is interim chairman of the regulatory body. The government had set up a search committee to select new chairman. Mr Sarma, who has a lot of exposure in the telecom sector, was the Telecom Commission chairman from June 2005 to July 2006. He was appointed TDSAT member on July 28, 2008. Being the regulator of a high-growth sector Trai has over time become more sensitive to consumer interest. According to Telecom Regulatory Authority of India figures, India added 15.87 million telephone connections during March. The total number of telephone connections reached 429.72 million till March 31, while the total wireless subscribers base (GSM, CDMA and wireless local loop-fixed) stood at 391.76 million.

WIPRO AHEAD IN RACE FOR SWAN IT DEAL

WIPRO, which has bagged two large IT outsourcing contracts from telcos, is among the shortlisted contenders for another large deal, this time from Swan Telecom. The other vendors that have made it to the shortlist include IBM and Tech Mahindra. Swan Telecom is majority owned by UAE-based operator Etisalat. If Wipro bags this deal, it would have won as many large outsourcing deals from telcos as IBM. Earlier this week, Wipro announced a nine-year deal with Unitech Wireless estimated to be worth Rs 2,500 crore. In January 2008, it bagged a $600-million contract from Aircel Cellular. The deal with Swan Telecom is expected to be as large as the Unitech Wireless contract, said industry sources. IBM has large outsourcing contracts from Bharti Airtel, Vodafone and Idea Cellular. Till the Aircel deal was announced in January 2008, it had a dream run bagging all the large deals from telcos. Seven vendors had bid for the Swan Telecom contract, of which four could be in the final shortlist, said an industry expert who did not want to be named. New telcos not comfortable with IBM THE industry expert said operators may prefer outsourcing to a player other than IBM for competitive reasons. “Wipro could be a favourite to win because IBM already has three large operators with it. So new operators may prefer not to go with it. Tech Mahindra’s niche focus may work against it in such contracts because the operators want vendors with a broad area of expertise,” he said. Compared to Wipro, Tech Mahindra is a relatively new entrant in the domestic market. Swan and other new operators are negotiating their IT contracts ahead of placing equipment orders. In response to a query on the company’s IT outsourcing plans, a Swan Telecom spokesperson said, “We are currently in the preparatory stages and will announce our plans for the Indian market at the appropriate time.” In response to an e-mail from ET, Wipro said, “Wipro does not comment on speculation and as a policy we do not comment on specific clients or business.” New entrants such as Unitech, Swan, Datacom and Loop are liable to pay penalty if they don’t launch services even after 52 weeks of spectrum allotment. Beyond 52 weeks, there is a grace period of three weeks. “We evaluated Wipro on all parameters—financial and commercial—and found the company extremely competitive. Also, being new in the (telecom) vertical, they brought a lot of freshness in approach and innovative ideas. We went about it objectively and Wipro had the team and infrastructure to support the project,” Aircel COO Gurdeep Singh told ET, explaining why the company decided to outsource to Wipro.

Essar may sell Indus stake to fund Loop

THE Ruias-owned Essar Group is considering monetising its holding in Indus Towers, the world’s largest telecom tower company. The holding is estimated at 14% and the money from any stake sale is expected to be used for the rollout of its wireless services through Loop Telecom, which has the licence to provide pan-India cellular services, according to two industry officials and a banker familiar with the matter. Standard Chartered Bank is advising Essar on the transaction and the deal is at a preliminary stage, according to the banker. Essar strongly denies any plans to sell its stake. In response to an email questionnaire, an Essar spokesperson said, “We are not looking at selling our interest in Indus nor have we appointed anyone for the exercise.” A spokesperson for Standard Chartered declined to comment. Indus, the three-way passive infrastructure (industry jargon for telecom towers) joint venture between Bharti Airtel, Vodafone Essar and Idea Cellular, currently has over 90,000 towers across 16 service areas. While Vodafone Essar and Bharti Airtel each hold a 42% stake, the AV Birla Group-owned Idea Cellular has the remaining 16%. The Essar Group holds the stake in Indus through Vodafone Essar, in which it owns 33%. In a recent report, Nomura Securities valued Indus at $9.5 billion on the basis of a transaction in which Quippo Telecom, owned by Kolkata-based Kanorias, merged with the passive infrastructure arm of Tata Teleservices in a deal announced in January ‘09. An even more recent transaction in the telecom tower space was the buyout of Xcel Telecom, an upcoming tower entity with 1,700 towers, by American Tower Corp for around Rs 800 crore in March. An industry official familiar with the development said the Ruias will use the funds from the stake sale for the expansion of Loop into other circles. Deal could fetch Ruias $1.3 b LOOP already offers services in the Mumbai circle. For the Ruias, a possible deal could fetch over $1.3 billion, despite the current economic downturn. This is because the telecom sector has remained largely unaffected by the slowdown. It is not yet known if there are any investors interested in acquiring Essar Group’s stake in Indus. Indus is likely to be listed in 1-2 years as part of the value-unlocking process. Apart from its holding in Indus, the Essar Group also has its own tower firm, called Essar Telecom Infrastructure, which has around 4,000 towers across 13 circles. Reports in the past have said the group is also looking at a possible merger of this company with the Tata-Quippo tower entity. Indus Towers was formed in end-2007. Apart from being the world’s largest telecom tower firm, its sites have assured tenancy and a stake in the company could come at a huge premium compared to other deals in the recent past in this space. This is on account of having three of the biggest names in the Indian telecom industry as its shareholders. Already, private equity firm Providence Equity Partners has an indirect stake in Indus Towers. Idea’s stake in Indus is held through a subsidiary called Aditya Birla Telecom (ABTL), which holds the licence for the Bihar circle. In May last year, Idea sold 20% stake in ABTL to Providence for $640 million. As a result, Providence holds an indirect stake of around 3% in Indus. Investor interest has remained unabated in the Indian telecom sector, which is one of the world’s fastest growing markets. With monthly subscriber additions of around 15 million and a teledensity of just over 30%, analysts say there is more room for growth.
No norms violated: Loop Telecom LOOP Telecom on Wednesday said that the company has not violated telecom regulations and the Essar Group’s holding in the company was only 9.99% in compliance with the licensing conditions. This comes after ministry of corporate affairs (MCA) asked the communications ministry to reconsider granting a telecom licence to Loop Telecom. The MCA, after investigating the ownership of Loop Telecom, had said that while the Essar Group did not have a direct stake in Loop Telecom, funds from the Mumbai-based group was routed into Loop through other companies. It also added that Loop’s operations were controlled or influenced by the Essar Group promoted by the Ruias. As per existing telecom licensing rules, a single company cannot own more than 10% in two different telecom firms. The Essar Group, through companies registered in India and Mauritius, also owns 33% in Vodafone Essar, India’s third largest private telecom company. “Neither does the Essar Group has substantial equity in Loop Telecom (LTPL), nor does it control any of its (Loop’s) parent companies BPL Communications and Santa Trading (STPL),” Loop Telecom said in a communication to the Department of Telecom (DoT). The MCA had said that Loop Telecom was owned by a company named Santa Trading (STPL), which is owned BPL Communication and BPL Mobile Communications. The Essar Group does not have a direct stake in STPL, but has a 9.99% stake indirectly. Besides, MCA also said that STPL was owned by Kiran Khaitan, sister of Ruia brothers - Shashi and Ravi - who own the Essar Group of companies. Additionally, the corporate affairs ministry also added that while the Essar Group ‘was not an equity holder in STPL, it has invested Rs 1,592 crore in its unsecured, non-convertible debentures.’ Loop Telecom has licences to start GSM-based cellular service in 21 telecom circles in the country and has been allocated spectrum for 20 circles. The company informed DoT that it is scheduled to launch services in five circles in May 2009. IN THE LOOP Ministry of corporate affairs has asked the communications ministry to reconsider granting a telecom licence to Loop Telecom As per existing telecom licensing rules, a single company cannot own more than 10% in two different telecom firms The Essar Group , through companies registered in India and Mauritius, also owns 33% in Vodafone Essar .