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CORPORATE
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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