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Scrutiny
  
The raucous 500!!!
With players from multifarious enclaves longing to acquire the telecom licence, it’s a mad scuttle out there...
18/10/2007

The movie ‘300’, an inarguably classic masterpiece of the year 2007, was about the ruthlessly ferocious battle of Thermopylae, during which a supremely efficient ‘army’ of 300 Spartans fought gloriously against one of the greatest Persian kings, Xerxes, and his unimaginably massive battalions. Amusingly, the Indian telecom sector is poised to mirror a ruthless ferocious battle between some of the greatest ‘kings’ of Indian telecom (Ambani, Mittal, Birla, Tata et al), and a supremely ‘inefficient’ motley crew of, hold your breath, 500 (at the last count) bidders for Department of Telecom’s fresh telecom licences!

Imagine, who all could end up providing telecom services to you! From real estate firms to finance companies, from consumer durables organisations to steel corporations, the list simply seems smashingly confusing. Be it industry analysts, company executives or government officials, this absolute madness of these cash rich companies to enter the telecom sector has taken one and all by the surprise.

Come to think of it, not many people remember that it was just 12 years back, in 1995, that the first call on a mobile phone was ever made in India. And the cost for one call at that time was an astronomical Rs.16! Though Sunil Mittal (and Essar, with Hutch) rewrote industry benchmarks, it was the wherewithal of the Ambani brothers that made the industry realise what power cost leadership had. With a history of dominating the diverse sectors with their lethal weapon, termed as scale, their approach to telecom was no different, an approach that resulted in a person not only owning a mobile for Rs.500, but also making a call for less than a rupee. Well, this low cost strategy adopted by Reliance is easily one of the major factors which triggered the second wave of the great Indian telecom revolution. Today, the Indian telecom scenario is characterised by astronomical growth, falling communication cost and intense competition, which – if the entry of Vodafone, the world’s biggest telecom company, is anything to go by – is only increasing by leaps day by day. And with the recent circus of a licence bidding process, in one shot, there is now a pool of 500 noisy truant aspirants that just might end up making life hell for the kings and kingmakers of the Indian telecom industry.
have money, will bid...

Strangely, it seems that any and every Indian organisation with spare cash has bought tickets to this comedy show. Some of the big corporate names which have a telecom wish-list include the mighty real estate players like DLF, Unitech and Parsvnath, steel major JSW, consumer durables major Videocon and finance firm Indiabulls. Videocon Chairman Venugopal Dhoot said, “We have applied for mobile licences in all 22 circles. We are in talks with a global company for partnership in our telecom venture... Videocon would be a majority partner in it!” DLF Chief Financial Officer Ramesh Sanka also confirmed that the group has decided to apply for permission to operate in the telecom sector. DLF has supposedly earmarked around Rs.50 billion-to Rs.70 billion investment for its telecom foray.

One factor that has shocked the whole telecom fraternity is that while these corporate honchos have no shortage of money, they don’t seem to have the adequate experience to ensure sustainability in the highly competitive telecom sector. Harit Shah, analyst at Angel Broking says, “I am very skeptical about these players entering the telecom sector. I don’t see any synergy between them and telecom.” T.V Ramachandran, Director General of Cellular Operators Association of India (COAI) has also expressed his concern on the recent spate. According to him, the applications are from companies with no telecom background, and that it was possible that these were just proxies for vested interests. In order to determine the real entities behind the applications, COAI has asked DoT to lift the corporate veil so that competition was not compromised and no entity or promoter group was able to directly or indirectly breach any conditions.

But then, as reverse-critics comment, how much of telecom experience did the likes of Essar, Reliance, Birla, Tatas have before entering the industry around ten years back? Even the new bidders themselves do not seem to have any apprehension of their telecom foray and in fact, looked quite buoyant to capitalise on the supreme growth exhibited by the telecom sector. “It is a great opportunity to diversify into this new business area, as the penetration of mobile telephony is still on lower side in India, compared to developed countries,” says Pradeep Jain, Chairman Parsvnath Developer.

By:- B&E edit bureau: Devdeep Singh With inputs from Siddharth Nahata
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