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L E A D E R Monopoly UnLtd Unmindful of the anti-trust implications, the communications ministry has given the go ahead to a tacit pooling of operations of its telecom companies. Rivals are worried.
Tucked away as a single-column newsreport on the pages of a financial daily, this decision, taken by the dot in mid-February, envisages that telecom PSUs find ways to have a combined rollout of services. ''Licences are available for cellular, domestic long-distance, basic phone services, ISP and, in future, even international telephony,'' says a senior dot official. ''But not every PSU has the expertise and infrastructure in each area, so it would be nice if they can leverage each other's strengths and operate together.'' That's very different from what the scenario has been in the past. Each telecom PSU had a clearly demarcated area of operation. The newly formed BSNL stuck to basic phones and domestic long-distance services in the country, the same function was performed by MTNL in Delhi and Mumbai, while VSNL was the international long-distance provider. ''This is bound to change in this era of convergence,'' says the official. For instance, VSNL has applied for a basic phone licence in eight A category circles, and is contemplating a foray into domestic long-distance and cellular services. Something, which MTNL has already done and BSNL soon will. Enough scope for synergy. But why did they need dot permission for that? Can't they decide that on their own? They can, but would need to get clearance from the dot if they are to join hands and make investments in joint venture companies. What the dot is saying is this: find ways to share the telecom pie among yourselves; free market be damned.
''Theoretically, if BSNL were to either merge or form a new company with VSNL, which provided basic phone services, combined with domestic and international long-distance services,'' says telecom consultant, Mahesh Uppal, ''that would be anti-competitive, since other basic phone companies would have access to international long-distance only through a competitor, VSNL.'' And by bundling services, this entity could wipe others out of business. How is it that the Telecom Regulatory Authority of India (TRAI) is silent on this? ''We come in only if there are any tariff implications. And as of now, there aren't any,'' says a senior TRAI official. In other words, the TRAI's mandate is rather limited. It can't prevent such an entity from getting a licence, since that function rests with the government. Says a private telecom operator: ''The usual method of regulation is to regulate the incumbent monopoly.'' For instance, British Telecom wasn't allowed to get into cable telephony until 10 years after it was introduced, while AT&T had to restrict itself to long-distance telephony in the US. That's unthinkable in this country. ''TRAI is doing economic regulation in a narrow way,'' says Uppal. ''The regulator must have a role in who the players are and how they operate, and this can be done without giving the TRAI licensing powers.'' But that's not the case here. If the telecom PSUs-BSNL, MTNL, and VSNL-want to get together and squeeze out the approximately Rs 3,500 crore private telecom business, which includes cellular, basic, and ISP services, that's how it's going to be. While that's the plan hatched at Sanchar Bhawan, it might not eventually work out that way. ''VSNL will be privatised in another three months and all other telecom PSUs will also be out of government control in another few years,'' says VSNL's Director (Development), Vinoo Goyal. ''So, if the government doesn't have control and these companies are run by independent managements, why should they abide by such government directives?'' Let's hope that that's how it eventually works out and a free and fair market prevails. But through moves like these, dot can't seem to hide its intentions. If it had its way, Indian Telecom's only headquarters would be the Sanchar Bhawan. -Bharat Ahluwalia A U T O M O T I V E Maruti Udyog's makes its third recall in five years. But it doesn't necessarily mean it is slipping up. Recall is a dirty word in the automotive industry. For one, it scares customers away and sows doubts in the minds of potential buyers. Besides, it is an expensive exercise to carry out. But should customers really be complaining? Yes, but only for the inconvenience caused, because recalls (like Maruti's) are also a sign that auto makers are willing to pay (instead of asking the customers to do so by keeping silent) for the mistakes that happen on their assembly lines. Although the Indian automotive industry is more than 50 years old, the first nationwide recall of cars by any manufacturer in India happened in May, 1997, when Maruti decided to ask some 50,000 owners of its small car, the 800, to report to service stations for fixing a problem with the pinion in the steering assembly. Until then, most manufacturers had chosen to let defective manufacturing seem like natural problems of owning a vehicle. Why? Poor consumer protection and redressal. Therefore, when a company makes a recall, you know that systems are working as they should. When Bridgestone called back its ATX and Wilderness radial tyres fitted on some Ford vehicles, Blue Oval's President and CEO Jacques Nasser himself appeared on national advertisements, reassuring customers. Bridgestone, on its part, sacked its US chief of operations. Point? Customers are too precious to lose. That's the message Maruti wants to send out by asking owners of 46,000 Omni vans to stop by at any of its service stations to get the defective routing of fuel pipe to the engine redone. Says Uday Kulkarni at Sai Service, a Maruti dealer in Mumbai: ''It was a minor problem in that we had to retrack the fuel pipe. Recalls are good because customers feel happy and more confident about quality.'' In a similar, although belated, move, Telco is offering replacement of key parts in its small car, Indica, which went through a lot of teething trouble in the first few months of its launch. With an upmarket sedan in the pipeline, Telco (or, for that matter, any car manufacturer today) can ill afford to rub customers the wrong way. -Ranju Sarkar S U R V E Y It's software that has kept Dalal Street's gravy train going, says a survey. If you didn't invest in software stocks in the past five years, then please get up and kick yourself in the rear. According to a study conducted by the Mumbai-based Motilal Oswal Securities, while entire market capitalisation between 1995 and 2000, increased by Rs 3.41 lakh crore, that of India's top 100 Wealth Creators rocketed by Rs 5.15 lakh crore. Better still, the top 10 companies grew at a Compounded Annual Growth Rate (CAGR) of 73 per cent, while the BSE Sensex trudged up at a bare 9 per cent. ''The period has thus seen dramatic wealth creation in one segment and equally dramatic destruction in rest of the market,'' says the study. Motilal Oswal, which looked at corporate performance between April 1995 and March 2000, says that companies which have consistently created wealth for their shareholders are often the ones with a sharply focused business policy. That apart, the wealth creators have high entry barriers, built through either technological advantage or strong brand building. And for those who have, of late, been sniggering at 'new economy' companies, let it be told that new age industries such as technology, media, and telecom racked up earnings at a CAGR of 38.7 per cent versus their old economy contenders' 22 per cent. As it turns out, those Dalal Street analysts do know a thing or two about stocks. C A R S Move over, lemons; here come the assured cars. There are two things in life, wise men would testify, you should never do: one, change your tailor and, two, buy a second-hand car. You can now take the latter off the 'don't' list. Last month, Ford India and General Motors India launched their pre-owned car services that promise you an altogether different second-hand car buying experience. For instance, Ford Assured and gm's ok 5 Star will put all the used cars they sell through a three-step, 100-point plus check, besides a test drive, hoist inspection, and an engineering test. Says Ravi Mangipudi, General Manager (New Business Development), Ford India: ''We offer the widest warranty coverage both in terms of breadth and depth.'' But why are the auto majors-including Mercedes-Benz India-suddenly bullish on the used car business? The answer may lie in the size of the potential market. While no official data is available, it appears that the ratio of new car sales to used car sales in matured markets is 1:1.5, and up to 1:2 or 1:2.5 in less mature markets. Considering that nearly 6 lakh new cars will be sold in India this year, the pre-owned car market could be bigger at 12 lakh. Assuming a price of Rs 1.5 lakh per vehicle-contrary to expectations, Maruti 800 accounts for barely 35-40 per cent of used car sales, while the Zen and the Esteem segment account for nearly 60 per cent of used car sales at Ford Assured-the second-hand car market could easily rake in around Rs 18,000 crore per annum. Most manufacturers would be happy even if just a quarter of the market was tapped. Besides, that's a nifty way of moving a new segment of consumers onto a newer generation of cars. -Ranju Sarkar
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What do
you say when a clutch of companies that control around 95 per cent of a
market decide to join hands? Anti-trust, you'd scream if you were in the
US, and ''monopoly'' if you were in India. Right? Wrong. Not this time
round, anyway. For, typical of the ''we are the government, we are the
law'' syndrome that prevails in the Department of Telecom, no one in
Sanchar Bhawan seemed to think that any such provisions would apply when
they decided to allow telecom PSUs to work together.
Clearly, in their view, Indian telecom is
not about a free, competitive market, where the customer reigns. Instead,
it's about the government abusing its monopoly position, strengthening its
hold on the telecom market, and further squeezing private operators.