BT, AT&T Set Sights on India
State-run Mahanagar Telephone Nigam Ltd. (MTNL) has been granted a national long-distance license, and its new tariff for calls between New Delhi and Mumbai goes into effect on June 1. The move is expected to spawn a price war with India's four other long-distance carriers -- Videsh Sanchar Nigam Ltd. (VSNL) (NYSE: VSL), Bharti Tele-Ventures Ltd. , Reliance Communications Ltd. , and Bharat Sanchar Nigam Ltd. (BSNL) . Railtel Corporation of India Ltd. and PowerGrid have also been granted licenses.
They will soon be joined by competition from abroad, following a decision by the Indian government last year to raise the foreign investment limit for telecom companies. There have also been talks on a draft telecom policy that would introduce carrier pre-select and allow subscribers to choose their long-distance provider, opening up the possibility of foreign carriers entering the consumer market.
British incumbent BT has registered a subsidiary company, BT Telecom India Pvt Ltd., in New Delhi and received clearance from India's Foreign Investment Promotion Board in March.
"BT sees great potential in the Indian market and we plan to invest accordingly," writes BT's Asia/Pacific spokesman, David Clarke, in an email to Light Reading. According to Clarke, BT is awaiting clarification from the government on the investment rules before it moves ahead.
"We have not chosen an India partner yet for the 26 percent holding, and we have not decided what type of license we will apply for and have not applied for a license as we, along with other foreign carriers, have sought certain clarifications on conditions," Clarke writes. "The government is reviewing these issues and we hope that a resolution with be available in the near future."
The carrier is looking to provide networked IT services to the outsourcing market and become the "partner of choice for foreign MNCs [multinational corporations] seeking to enter the Indian marketplace." BT is also focused on the potential of domestic corporations. "We believe the Indian MNC sector will become increasingly attractive as certain verticals within the Indian MNC market such as Pharma and Financial Services globalise. BT will build select capability to service the needs of Indian MNCs in these sectors."
BT has partnerships with VSNL and Bharti to provide leased circuits and voice services and a deal with Bharti for managed data services.
BT's plans have reportedly been a source of controversy within the Indian government as politicians express concern that foreign carriers will carve up India's booming telecom market among themselves, particularly as BT is yet to name a local partner. That follows unease over Egyptian carrier Orascom Telecom 's deal to take an indirect 10 percent stake in Hutchison Essar . (See Orascom Buys Hutch Stake.) And according to press reports, AT&T's application for telecom licenses has raised red flags at the Department of Telecom because they would give it "blanket permission" to enter every sector of the market.
AT&T recently received the go-ahead from the Foreign Investment Promotion Board and formed a 74:26 joint venture with Mahindra Air Services called AT&T Global Network Services (AT&T GNS). The company is looking at providing a range of voice and Internet services, initially to the corporate market.
"We have applied for a variety of telecom licenses," AT&T Asia/Pacific spokesman Greg Brutus writes in an email. "As the license applications are under review we cannot say much more at this stage."
He adds: "We've also increased our investment significantly over the past 2-3 years and now have network nodes in Delhi, Mumbai, Bangalore and Chennai -- later this year [we] will add Hyderabad."
AT&T Business has been active in India since 1999, but previous regulations meant it had to provide networking services through an agreement with VSNL.
"The latest move by the Indian authorities allows much greater foreign ownership (up to 74%) which is very attractive to us, particularly with the strong growth in IT and IT-enabled services/businesses in India," writes Brutus.
Incumbent long-distance provider VSNL has an extensive global network thanks to its acquisition of Teleglobe and is already benefiting from the relaxed regulations. (See VSNL Pays $239M for Teleglobe.) MTNL has switched over from sister company BSNL to reselling a cheaper VSNL service on the New Delhi/Mumbai route, and is inviting bids to carry its voice traffic for the rest of the country.
— Nicole Willing, Reporter, Light Reading