Interview: Jorma Ollila; "We will continue on the road we've created"

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Modi opts for the M&A route

After buying out Telstra's stake, CEO Dilip Modi's strategy hinges on the potential unleashed by the convergence of technologies.

-Rakhi Mazumdar

It was yet another sequel to the telecom shakeout. In September, 1999, when B.K. Modi's son, Dilip Modi, replaced Barry Cooney, the representative of the Australian telecom major, Telstra, as the CEO of Modi Telstra, the signals were loud and clear. Five months later, the Modis-along with 2 other partners, Distacom (Hong Kong) and AIG Infrastructure Group, US)-bought out Telstra's 49 per cent stake in the venture which provides cellular services in Calcutta. The Rs 70-crore buyout also meant that the Modis were serious about exploiting the potential unleashed by the convergence of the wireless and the Net.

Dilip Modi, 29, said: ''We see ourselves well-placed to take advantage of the expanding opportunities being thrown open by this sector.'' And why not? Don't forget that, apart from their Rs 1,700-crore investment in the cellular business-including the 51 per cent stake in Spice Telecom, which runs cellular operations in Karnataka and Punjab-the Modis control 3 infotech companies too, Xerox Modicorp, Modi GBC, and MOL India. And these companies might bid for providing cellular services in the West Bengal circle (excluding Calcutta), where Reliance Telecom is the only other player.

However, the Modis will face problems in trying to double their subscriber-base in Calcutta from the existing 50,000 during the next 2 to 3 years. Apart from competition from Usha Martin Telekom, which runs its operations under the Command and Yes! brandnames, Calcutta Telephones has plans to provide the service within the next 6 months. And the latter can outwit its nimble private sector rivals by designing effective airtime packages. For instance, in October, 1999, the Mahanagar Telephone Nigam started its cellular telephony service in Delhi-through the wireless in local loop technology-at Rs 1.50 per 3 minutes for outgoing calls against the Rs 6 charged by its rivals.

Under the new revenue-sharing regime, Modi feels that the viability of cellular operations has changed. Therefore, he plans to offer wireless Net services through the cellphone. But both the West Bengal and the Calcutta circles offer lower growth opportunities compared to Mumbai or Delhi. That's why Reliance is the only player in West Bengal.

That also explains why Telstra had decided to pull out. Not surprisingly, other telecom transnationals like Jasmine International of Thailand and Bell Canada have withdrawn from their respective ventures in the past 12 months. However, Telstra, which has decided to reduce its workforce by 20 per cent, maintains that its decision was linked to a change in its global strategy. Reveals Ashok Barat, 46, Telstra's Chief of Operations in India: ''Cellular services is no longer a part of Telstra's core strategy in India.'' Telstra has already formed an alliance with NIIT to offer a range of value-added application and communication services in India and the Asia-Pacific region.

For Dilip Modi too, the convergence of strategy will be more crucial than the opportunities thrown up by the convergence of technologies.

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