Unlocked Apple iPhone 3G S for India in April

The device will be available for one-year lock-in

Bhaskar Hazarika

For the first time an official, unlocked iPhone will be available in India. By midApril, Apple will launch the iPhone 3G S in India, more than 10 months after its global launch reports Bhaskar Hazarika in New Delhi.

The high-end handset will be sold in the open market, not necessarily only through Apple stores or telecom operators.

However, there is another lock-in condition  a buyer of the new model cannot change the operator for one year. The handset will get automatically locked if the SIM card is changed during the period.

The open-market sale indicates Apple has learnt its lessons in India, which gave a lukewarm response to the iPhone 3G launched in August 2008. A person close to the development told Financial Chronicle that the model, locked and tied to specific telecom operators, gave little Indian business to Apple. Hence, the change in strategy.

According to market estimates Apple has sold at the most 30,000 iPhone 3G handsets through Airtel and Vodafone in India. No data from Apple were available.

However, the iPhone 3G S, launched globally in June last year, is already available in the Indian grey market.

The industry estimates that Indian grey market sales of iPhone 3G and 3G S could be between 80,000 and 1,00,000 handsets.

Among operators Airtel and Vodafone will offer the new model. But Apple is also in talks with other operators. With India readying for 3G services, it makes sense for Apple to dovetail its marketing strategy to the needs of the Indian market. An email sent across to Apple failed to elicit any response.

Last week Bharti Airtel in an official statement said the iPhone 3GS would be launched in India in "the coming months". It did not specify any date.

The iPhone 3G S is sold globally in two models: 16GB and 32GB. On the AT&T network in the US the 16GB model is available for $199 (about Rs 9,950) and 32GB for $299 (Rs 14,950) on a bundle offer with a two-year lock-in.

Compared to the earlier iPhone 3G, the iPhone 3G S is faster and with longer battery life. It supports speed of 7.2 mbps and has a 3 megapixel auto-focus camera.

© Financial Chronicle

DoT to lift S Tel ban

FIPB to take a call on S Tel stake hike application today

Bhaskar Hazarika & Sanjeev Sharma

New Delhi: The controversy over the lawful interception issue for new telecom operator S Tel could end in a couple of days.

A top official in the department of telecom (DoT) on condition of anonymity confirmed to Financial Chronicle that the issue had been resolved and the permission for unrestricted services would be granted to the company.

Lawful interception is a technological process through which security agencies can intercept voice as well as data signals transmitted across telecom networks.

"There have been issues over lawful interception in three circles, Himachal Pradesh, Orissa and Bihar, and for which DoT had sent a notice to S Tel. The matter has been now resolved and the clearance certificates will be issued within a couple of days," the official said.

According to him, the lawful interception permission is granted by security agencies and renewed from time to time.

The official said that the reason why S Tel was told to stop services in the three circles on March 5 was that the operator had failed to maintain the interception guidelines there. "Once the software for interception is installed or restored, as promised by the company, DoT will lift the ban," he added.

S Tel's chief executive officer, Shamik Das, told Financial Chronicle, "We have had talks with DoT and the matter is getting resolved. We are expecting a communication from the department." S Tel also met communications and minister A Raja to resolve the issue of lawful interception.

S Tel had earlier challenged in the Supreme Court the DoT decision to advance the cut-off date for applying for new 2G licences from October 1 to September 25 in 2007.

The company has licences to operate in six circles and has begun operations in three where it has 8,00,000 subscribers. Das said the company was waiting for spectrum to start services in the remaining three circles --North East, Assam and Jammu & Kashmir.

In January S Tel grabbed 20 per cent of all new subscribers. It added to its base 3,64,000 subscribers in that month.

S Tel is a joint venture between the Chennaibased Siva group and Bahrain Telecom Company (Batelco), which has 42.7 per cent in the telecom company. S Tel has sought approval from the foreign investment promotion board (FIPB) to hike the foreign direct investment in it to 49 per cent. The application will be taken up for consideration on Friday.

© Financial Chronicle

3G auctions slated on April 9

DoT to issue NIA for prospective bidders on Thrusday

Bhaskar

New Delhi: The government has announced to hold the 3G spectrum auctions on April 9. The Notice Inviting Applications from prospective bidders will be issued tomorrow. The last date for receiving applications from bidders is on March 19. The government will hold mock auctions on April 5 and 6. Two days after the 3G auctions are held, the government will start the auction for Broadband Wireless Access (BWA) or WiMax spectrum.

© Time

Zain deal could generate free cash flow of $11 billion for Bharti

Analysts suggest Zain deal high priced

Sanjeev Sharma & Bhaskar Hazarika

New Delhi: Telecom major Bharti Airtel’s $10.7 billion proposed transaction to buyout Kuwait-based telecom company Zain’s African assets could generate free cash flow of $11 billion in five years. Morgan Stanley report states, “The consolidated entity would address 1.5 billion population with over 164 million subscribers, with Ebitda 26 per cent higher than Bharti standalone, growing at 11 per cent per year (financial year 2010-2012E).

Analysts say that Bharti would be able to de-leverage itself in a couple of years. The report says the consolidated entity’s cash flows would be $13 billion in five years.

Bharti in an official statement said, “The total agreed enterprise valuation of $10.7 billion is likely to result in a total payout of around $9.00 billion (which includes any loans payable by the operating companies to Zain Group) based on the estimated net debt of approximately $1.7 billion as on December 31, 2009. It has been agreed that a sum of $ 700 million out of the total payable amount would be paid after one year from closing.”

Just after Bharti and Zain announced payment milestones, Econet Wireless, which holds 5 per cent stake in Zain’s Celtel Nigeria BV unit, has clearly opposed the deal, citing first right of refusal over the Nigeria operations. Official statement from Econet said, “It is currently pursuing arbitration proceedings against Celtel (now Zain) and others to challenge the transaction. Under the terms of the original VNL shareholders agreement, Econet had a right of first refusal over the stake, a right, which was denied in 2006. Econet made an application for interim measures to prohibit Celtel (now Zain), from selling, transferring, disposing of, dealing with or otherwise encumbering the disputed stake until such time as the Arbitral Tribunal has published its final award.”

According to Macquarie report, “The valuations look very expensive, in our view, even assuming no debt is being acquired by Bharti. This is a loss-making business at the PAT level, even while it makes an Ebitda margin of 31.4 per cent with average blended ARPU of $6.2. Bharti may be banking on significant improvements in capital expenditure efficiencies and better financing terms for this business, but quick comparisons with MTN suggest that this business is significantly inferior in terms of profitability, operating metrics and growth outlook.”

Bharti stock has fallen almost 14 per cent in the last two days.

Talking about regulatory hurdles Morgan Stanley states, “We suspect some licenses in Africa will face change of control reviews, but we do not see this as a major stumbling block for a potential deal. We are waiting on clarity on the Kuwait Investment Authority – a 24 per cent shareholder – position on the deal though in the past it has been supportive of such a transaction.”


© Financial Chronicle

Zain board approves Bharti's bid for Africa

Bharti eyes high-growth markets to beat competition at home

Bhaskar Hazarika & Sanjeev Sharma

New Delhi, February 14: Kuwait-based Zain telecom could be the second major overseas expansion plan for the largest Indian telco, Bharti Airtel after it failed to ink the deal with South African telecom operator MTN. Zain board on Sunday unanimously accepted the bid from Bharti Airtel to buy Zain's African assets.

Kuwait Investment Authority (KIA), which has a 24.6 percent stake in Zain has put its stake on the block. Bharti has offered a bid of $10.7 billion to buy a stake in the company for its African assets excluding except for Sudan and Morocco.

When contacted Bharti Airtel spokesperson declined to comment. An email sent across to Zain failed to elicit any response.

Director telecom, KPMG, Romal Shetty said that Africa is one of the lucrative markets for operators. "In the next 3 to 4 years India will continue to be the most difficult market with 12 to 13 operators. For Bharti getting in Africa market, it could be the right time. As the company has pioneered the low cost concept, it can replicate the India success in Africa," Shetty said. He said that the compared to India the ARPUs in African market is around Rs 480 to Rs 500 ($8-10) compared to India, where ARPUs stand at sub- Rs 200.

According to Citigroup report, net debt for Bharti reduced by Rs 23 billion to Rs19 billion during the third quarter. "Overall net debt is down Rs 50 billion this fiscal, indicating strong free cash flow generation with lowering capital expenditure intensity. In the third quarter capital expenditure stood at Rs 17 billion," the report stated.

Managing director, Taurus mutual fund, RK Gupta said, "Costumer growth in India will be become stagnant in 3-4 years and Bharti has to look out for growth beyond Indian geography. African is an unexplored territory where growth can happen, compared to other geographies such as South East Asia, Europe where growth has declined. In case of Bharti, picking up a stake in Zain will add to the subscriber numbers and will boost the revenue. Only major area of growth in India is adoption of 3G."

An investment banker close to the development in condition of anonymity told Financial Chronicle, "Bharti had earlier said that it would continue to pursue international expansion. The company had clearly mentioned that Africa remains to be an important geography for expansion. Zain will offer Bharti access to one of the growth markets globally, with only three operators. This would also help Bharti to beat the pressure on their margins, which has witnessed a decline."

In December Bharti has picked up 70 per cent stake in Bangladesh telecom operator, Warid Telecom with an initial investment of $ 300 million.

Zain is the third-largest telecom operator in the Arab world. Last year a consortium n October halted talks to sell the African assets to appease potential buyers of a 46-percent stake in the parent company, Zain Group.

In October 2009, Indian telecom PSUs BSNL and MTNL joined the consortium with an Indian firm, Vavasi expressing their keenness to take a majority stake in a joint special purpose vehicle (SPV) to buy 46 per cent in Zain, along with Malaysian billionaire Al Bukhary.

Bard al-Khorafi, whose Khorafi Group holds 20 per cent in Zain, announced in September that they, along with other shareholders, were selling 46 per cent of Zain to a consortium made of Malaysia’s al-Bukhari Group, BSNL, MTNL and the Indian group called Vavasi.


© Time

TRAI gears up for 2G allocation policy

Regulator set up a spectrum cell to look at 2G and 3G allocation policy and pricing

Bhaskar Hazarika

New Delhi, February 15: Auctions for third-generation (3G) spectrum may have delayed, but there could be hope for telcos waiting for allotment of 2G spectrum. Telecom Regulatory Authority of India (TRAI) is readying itself prior to the allocation of 3G and 2G spectrum by setting up a spectrum cell. The spectrum cell would facilitate recommendations for both 2G and 3G allocation policy.

Department of Telecom (DoT) had received 232 applications for Unified Access Service License (UASL) till September 25, 2007. Of the total 122 applicants have been Letters of Intent (LoI). Apart from existing telecom companies seeking for additional spectrum, new operators such as Sistema Shyam, Uninor and S Tel are in the queue to receive fresh spectrum in some of the selected circles.

This move comes after the regulator received mixed response from the telcos on allocation of additional 2G spectrum. The regulator is yet to take a call on auctioning of 2G spectrum.

A senior official from the ministry of communications and IT told Financial Chronicle that the spectrum cell would include experts dealing with spectrum allocation and auctions. “At present the spectrum cell has two people, one from TRAI and the other from Wireless Planning and Coordination (WPC). Additional number of experts are likely to join the cell, which will look at different aspects of spectrum allocation and pricing,” the official said.

He said that the spectrum cell has been created with the objective to look at the minute details on the auction of additional 2G spectrum. “There have been mixed views on the auction of 2G spectrum. The regulator is yet to decide if 2G spectrum should be auctioned to telcos, up and above the start up spectrum of 4.4 MHz or above 6.2 MHz. Also there have been discussions on the pricing of 2G, the expert committee will take a call on formulating the recommendations. It would also look in to sharing and trading of spectrum, cap on the number of service providers in a circle and merger and acquisition,” the official added.

The operators have been demanding early allocation of 2G spectrum, prior to the start of 3G auctions, which is scheduled to take place in September 2010. Telecom regulator is working to come up with a consultation paper on allocation of additional 2G spectrum.

WPC, wing under the Ministry of Communications and IT, is responsible for spectrum management. In a recent move WPC has written to the ministry for hiring experts for managing the 3G spectrum and WiMax auction processes. With 3G and WiMax spectrum auctions round the corner, WPC has sought for additional manpower to manage the auctions. With this initiative from the regulator in setting up the spectrum cell, it is unlikely that the government would grant additional manpower to WPC.

© Financial Chronicle

Three buyers in talks to buy Aircel’s 17,000 towers

Sources say Tata Quippo and GTL Infrastructure in talks to buy Aircel towers

Bhaskar Hazarika

Telecom operator Aircel is in talks with three potential buyers to sell its 17,000 telecom towers. Chief operating officer of Aircel, Gurdeep Singh said the company plans to conclude the deal in a month or two.

“We are in the final stages of negotiation with the three potential buyers to sell the towers. We have not yet reached at the conclusion but are likely to finalise it,” Singh said.

However, Singh declined to reveal the names of the companies. Of the total 38,000 towers, Aircel owns around 17,000 towers. According to industry insiders, Tata Quippo and GTL Infrastructure are the two main players in the fray.

Malaysia’s mobile operator Maxis Communications holds 74 per cent in Aircel.

© Financial Chronicle

Quick Preview: Tariff war scars to show in top lines of telecom firms Q3

Strong traffic growth may help companies post moderate growth

Bhaskar Hazarika & Sanjeev Sharma

Incumbent telecom companies are likely to witness moderate growth in revenues supported by strong traffic in the third quarter. Analysts have forecast a trend reversal in minutes of usage for incumbent operators while a slight appreciation in rupee will support their performance at the PAT (profit after tax) level.

The Citigroup report said, "Bharti and Rcom should benefit from a slightly appreciating rupee. In Rcom's case, depreciation charges will be higher quarter-onquarter as GSM capex gets capitalised and the second quarter had the adjustment of depreciation change."

With the entry of new players into the telecom space, the industry saw fragmentation in minutes of usage of incumbent operators. More telecom players in each circle and introduction of one-paise per-second billing have resulted in stiff competition, putting lot of pressure on margins.

"We forecast wireless revenues for GSM incumbents (Bharti and Idea) to grow 1 per cent to 3 per cent quarter-on-quarter aided by strong traffic growth. The encouraging traffic trend is also likely to limit EBITDA margin pressures, which will mean the overall EBITDA will remain flat," said the report. The report forecasts a drop in estimated revenue per minute for pure GSM operators. "The decline for Idea could be more compared with Bharti given aggressive tariff cuts, especially in new circles.

Rcom's revenue per minute decline is also likely to get impacted due to tariff cuts announced at the beginning of the quarter," the report stated. KPMG executive director Jaydeep Ghosh said the payper-use tariff is likely to have an impact on the top line for incumbent operators in the third quarter. He said competitive packages offered by the telcos are a matter of concern. "We see a healthy trend in the minutes of usage. However, for new operators we see a challenge in the uptake of subscribers.

For incumbents, there will be a challenge in maintaining the revenue and top line," Ghosh said.

An Angel Securities report says, "Bharti Airtel, Rcom and Idea Cellular are likely report subdued top line growth to the tune of 3 per cent year-on-year and 1.4 per cent quarter-onquarter during the third quarter. We expect Bharti Airtel to report 3.4 per cent YoY in net revenues. Rcom is expected to clock 0.5 per cent YoY de-growth in net revenues.

© Financial Chronicle