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TELECOM We're All In This Together Global re-alignment in the telecom space could tangle the wires in the domestic telecom industry. By Suveen K. Sinha
It could mean cartelisation. It could result in competitors sharing strategic information they do not intend to. Or it could be the provocation for the usually trigger-happy GoI to step in and 'regulate' the sector some more. Whichever way you look at it, this is the defining moment for the Indian telecom sector. And how things turn out could well decide the fate of a business that seems to be a magnet for Foreign Direct Investment (FDI). The details:
The issues? Hutchison Max already offers the Orange service in Mumbai. And telecom regulations prohibit an entity from owning even a small stake in competing service providers. Resolving Ownership Issues
Strange, but no one seems to know what the likely course of action may be in these cases. Government officials refuse to talk about them, while company spokespersons are confused. ''An interesting landscape is emerging in India as a result of consolidation. There is some amount of confusion: brand confusion and partner confusion,'' admits Rajeev Chandrasekhar, 34, Chairman and Chief Executive of BPL Innovision Business Group. Still, most people BT spoke to for this article seemed to think the situation was no more than a tempest in a thimble. While the head of France Telecom's India operations, Sanjay Kumar, could not be contacted, Hutchison Max is confident of its right to use the Orange brand. Says a company spokesperson: ''We have the marketing and technology rights to the brand in India as well as in Australia, Austria, Belgium, Hong Kong, Israel, and Switzerland.'' So why has the company been talking about introducing the Orange brand in Delhi, where it owns 49 per cent in cellular service provider Sterling Cellular, but not doing it? ''If you already have a good brand like Essar Cellphone, there is no sense in killing it. Why launch Orange immediately?'' says the spokesperson. Nothing dramatic may happen on the regulatory front. ''After all, many recent M&As do seem to make a mockery of the 49 per cent cap on foreign equity placed by the government in telecommunications,'' points out Deepak Kapoor, 41, the head of technology practice at PricewaterhouseCoopers. Secondly, AT&T's take-over of Media One has yet to be cleared by the US Federal Communications Commission. The implications of the merger will become clearer only after that. ''There is always the option of splitting Media One's holding in BPL US West and keeping it under a separate company,'' explains Ramji Srinivasan, 35, a lawyer who specialises in telecom regulation. Chandrasekhar is sure there will be no impact on BPL: ''A change in the minority shareholding makes no difference for us.'' Besides, in some cases (like the Bharti Cellular-Spice one) the issue is not of immediate, but eventual ownership. Bharti Group CEO, Sunil Mittal, 43, believes there can be no issue, even technically, in the case of the two Singapore companies. ''The Singapore government merely holds minority equity stakes in them, both the companies are listed there, and hold no executive position in the Indian operations,'' he says. Points out Dilip Modi, 26, the Chief Executive of ModiCorp's cellular business: ''Even in Singapore, SingTel, and SingTech compete with each other.'' Seconds Kapoor: ''The (ownership) ladder is too long.'' That apart, existing licence terms have little relevance in a scenario where the government is itself considering modifying them to facilitate the entry of more companies. Resolving Cartelisation Issues Fears of anti-competitive practices may also be largely unfounded. Tariffs, after all, are defined (in terms of a ceiling) by the Telecom Regulatory Authority of India (TRAI). ''Besides, there is nothing you can do with common ownership that you can't do without it,'' points out the representative of a transnational telecom company, who cites the observation of a former member of the TRAI about the identical tariff structures presented by competing operators in a circle to prove his point. And the entry of more telecom companies into the fray (as envisaged by the government) could spell the death of any budding monopolistic ambitions that the existing players may have. This is not to suggest that there isn't an issue at all. The government, which has so far chosen to remain passive, could, at any time, change its mind and the relevant telecom regulations. However, telling a transnational telco to pull out of a circle in, say, six weeks because of its global acquisition of a company whose subsidiary owns a certain percentage of equity in the competitor in that circle won't do. As AT&T's President for Asia Pacific, Chip Barton, remarked at a recent seminar: ''Twentieth century regulation cannot work with 21st century technology and business norms.'' Amen. |
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