Ranbaxy's Singh: Growing appetite

Just nine months into the corner room and he's got five global purchases to show. But Malvinder Mohan Singh, CEO & MD, Ranbaxy Laboratories, is not done yet. With a stated-goal of being among the world's top five generics companies by 2012 with $5 billion in revenues, Singh is relentlessly pursuing acquisitions. Says Singh: "We are keen on Europe, the us and emerging markets."

Investment banking circles have been rife with speculation of Ranbaxy closing in on deals in the US and Russia. As per the tittle-tattle, Ranbaxy is keen on buying a us mid-sized generics company, URL/Mutual Pharmaceuticals. The latter is a $300-million (Rs 1,380-crore) company with a range of Abbreviated New Drug Applications for injectible products and was put on the block recently. The US firm makes sense for Ranbaxy as around 29 per cent of its sales in 2005 came from the US. In the last one year, Novartis, Dr Reddy's and Ranbaxy have acquired Hexal, betapharm and Terapia at four times, three times and four times sales, respectively. Going by this, Ranbaxy might have to shell out $900 million-1.2 billion (Rs 4,140 crore-5,520 crore) for URL/Mutual.

W
hile Singh seems to have spent $400 million he had raised from an FCCB issue on the five purchases, he still has shareholder's approval to raise $1.5 billion (Rs 6,900 crore) in equity and $1.2 billion in debt. Sources say he could be looking at joint bids with private equity players. "Consolidation is the way forward in global generics. We are open to any opportunity," says Singh, adding he's keen more on Europe than the US.

-Archna Shukla

A Spectrum of Protests
GSM and CMDA lobbies have gripes with the new 3G recos.

Scarcely had the telecom Regulation Regulatory Authority of India (TRAI) submitted its much-awaited recommendations on pricing and allocation of spectrum for 3g services to the Department of Telecom (DOT) last fortnight than the war of words between the GSM and CDMA lobbies took off. The cellular operators using GSM technology feel the recommendations are "rather slanted in favour of CDMA and disadvantageous to GSM", which is how the Cellular Operators Association of India (COAI), which represents the GSM lobby, put it.

CDMA operators have been allocated two carriers of 2x1.25 MHz each in the 800 MHz band and the option of one carrier of 2x5 MHz in the 450 MHz band. Together the GSM and CDMA players have been given five carriers of 2x5 MHz each in the 2.1 GHz band. For the 800 MHz band spectrum, as there are only two operators in most circles-Reliance and Tata-the spectrum in this band will not be put up for bidding but instead will be given to the operators at the pro-rata price of second highest bid received for 2.1 GHz band. Those who are allocated spectrum in 800 MHz and 450 MHz bands (combined 2x6.25 MHz) will not be eligible for applying for spectrum in the 2.1 GHz band. But those CDMA operators opting out of the 450 MHz band will be given 2x3.75 MHz of spectrum in the 2.1 MHz band, depending on their bid amount. For the GSM operators, however, 2x5 MHz of spectrum will be given depending on their bid amount.

The COAI is of the view that immediate allocation of spectrum in the 800 MHz band and that too at the second-highest bid amount would give CDMA operators an unfair first-mover advantage and a pricing edge as well. The TRAI counters that there are only two operators. "Also, the spectrum is virtually the same in this band and thus it does not make much sense to price it very higher for 3g than for the 2g," Rajendra Singh, Secretary, TRAI told BT.

COAI's other gripe is the reservation of the 450 MHz band spectrum for CDMA operators only, saying that this band has superior propagation characteristics. "It is discriminatory and incorrect to stipulate that 450 MHz would be only for CDMA operators for 3g," goes a statement put out by T.V. Ramachandran, Director General, COAI. Head of the CDMA Development Group (CDG) India, B.V. Raman, says CDMA operators will be given "only" 2x1.25 MHz, which is nowhere in proportion to the 2x5 MHz in 2.1 GHz band for GSM operators.

The GSM and CDMA lobbies may not appear pleased but their biggest task going forward is to bid sensibly with one eye on recovering the investment soon enough, and the other on ensuring they aren't left behind.

-Shaleen Agrawal

A Step Back in Time
A rollback in FDI in telecom will send out the wrong signals.

Darryl Green: The Foreign Bogey

Even as the regulators of the telecom industry were plotting a route map to enable cellular players to roll out 3g services last fortnight, the grapevine in the Capital crackled with talk of the government taking one step back on reforms in foreign direct investment (FFI). Reports indicate that the government isn't averse to drawing back the FDI limit to 49 per cent from 74 per cent. The trigger is a sticky norm in Press Note 5 for the telecom sector stipulating that the majority of directors on the board of a telecom company-including the Chairman, MD and CEO, Chief Technical Officer and Chief Financial Officer-should be resident Indian citizens.

Telecom companies are not thrilled as they realised that if they do take FDI up to 74 per cent, they might have to reckon with a host of knotty requirements. Remaining at 49 per cent level would mean a less complicated life. For now, Finance Minister P. Chidambaram has extended the deadline for complying with those conditions by three months to December 31. "We are in favour of going back to the earlier regime" says T.V. Ramachandran, Director-General, the Cellular Operators Association of India (COAI). For a while now, the bogey of security has been raised in the telecom sector and Press Note No 5 is pretty tough on that. It does not allow companies to access their networks from overseas locations. This comes under the purview of "remote access" and an operator like Hutch or Bharti cannot give the go ahead to Nokia or Ericsson to maintain or repair its network from any part of the world. "Security is an aspect of the licence conditions and not FDI," says Ramachandran.

The other issue concerns the telecom deals that were struck after the 74 per cent FDI limit. Malaysian operator Maxis acquired a 74 per cent stake in the C. Sivasankaran-owned Aircel, while the balance 26 per cent is held by Chennai-based Apollo Hospitals. Barring Maxis, no other foreign operator holds 74 per cent in any Indian telecom operation. The requirement relating to an Indian resident holding key positions also will affect on operators like Tata Teleservices (TTSL) whose CEO Darryl Green is an American. "It's a different thing that an Indian, Arun Sarin is Vodafone CEO," says a telecom official wryly.

-Krishna Gopalan

Outcasts in the Dream-shops
Meagre fees and high attrition plague media buying.

Maxus's Srinivas: Musical chairs

People playing musical chairs is commonplace in the media buying segment of the advertising industry. Attrition, at the lower levels, is estimated at a little over 30 per cent, and at the top, at least half-a-dozen executives change agencies every year. It is also an industry where a handful of players account for almost 85-90 per cent of the total business-GroupM agencies, for instance, account for almost 35 per cent of the total media buying and around 50 per cent of the rest goes to Madison, Initiative Media, Lodestar Universal, Mediacom and Starcom. There are at least a dozen more that survive on small billings.

This, however, doesn't mean that the big boys are raking in big money. As per accepted practice, of the 15 per cent commission that agencies get from clients, only 2.5 per cent goes to media buyers. So, if you go by the size of the advertising industry in 2005, estimated at Rs 14,000 crore, media buying agencies would have pocketed roughly Rs 350 crore in that year. According to many in the industry, that figure could be even smaller as many agencies now work for a certain fee, which ranges from 1-2 per cent of the total brand spend. "For all the human capital that the entire industry employs (a majority of old-timers in the industry are IIM-alums and many others are from other leading B-schools), the R&D that goes into the business, and for all the applications and the implementation, the economic value that the business creates is way too small and uninspiring," says C.V.L. Srinivas, Managing Director, Maxus, Asia Pacific, a GroupM agency. Srinivas recently put in his papers without a job in hand.

Indeed, the annual billings of even the top agencies hover between Rs 25 and Rs 40 crore. And thanks to the proliferation of new media, the industry has had to invest a lot in evolving tools that help in understanding consumer psyche, media consumption habits, cost-effective ways of reaching consumers, and in enhancing returns on advertising spends. "This has put pressure on profits and a majority of agencies are operating on 8-10 per cent margins," says an industry insider.

The result is an increasing disillusionment with the business and, hence, high attrition. In the last fortnight only, some half-a-dozen executives, and these include high-profile ones like Debraj Tripathi, General Manager, Maxus Delhi, Alok Sanwal, Investment Director, GroupM, Jasmin Sorabjee, President, MediaCom, South Asia and Satyajit Sen, Vice President, MediaCom, have left their agencies either for a different one or with no appointment letter in hand. Then, there are many others who have left the industry for good, like Meenakshi Madhvani and Chintamani Rao. "Media agencies have no sense of identity. Also, the products or the services they deal with belong to different owners-the brands belong to the clients (advertisers), the ads to the creative team and the platforms to the media owners," says Madhvani, now Managing Partner, Spatial Access, a media audit agency. Madhvani, who claims to have "sparked off the exits" three years ago, was the CEO of Carat India, an agency she had launched in 1997. Rao, now CEO, India TV, quit Universal McCann, the media buying arm of McCann Erickson, as its President last year, for almost the same reasons. "Media buying has become entirely buying-driven, which leads to frustration," he says.

Are these just stray voices of discontent? Says Sam Balsara, Chairman and Managing Director, Madison: "Media buying is the most important function in the advertising business. Yet, the stakeholders fail to see the value it brings to the table," he says. The common grouse in the industry is that media buyers are getting a raw deal from clients who unjustifiably favour the creative function more. "Clients don't mind blowing big budgets on making impressive commercials but they tend to get stingy when it comes to paying media agencies," adds Balsara. And lower compensation from clients means lower revenues and hence lower salaries to employees and lesser investment in R&D. "The industry can no longer afford to hire people from any of the B-schools, let alone the big ones," says Srinivas, himself an XLRI-alum. There's little argument about the vital role of the media buyer. What's needed is a few good women and men to cheerlead the profession through its rough patch.

-Archna Shukla