India Wrap: Tensions & Tribunals
As usual there’s a lot going on in India’s telecom industry, so here are the highlights to close out a week when the Department of Telecom seems to have upset everyone from the nation's regulator, to Spice Telecom to BlackBerry .
The DOT is mulling the idea of creating a new form of 3G license that would allow new operators into the market and bypass the system for 2G, where operators are waiting in line for spectrum.
According to reports in the Hindu Business Line and Economic Times, Nripendra Misra, chairman of TRAI and a former secretary of the Department of Telecom himself, has fired off a letter helpfully reminding the DOT that it’s legally required to take the regulator’s recommendations into account before making any changes to the terms of the unified access service license (UASL) for operators. (See A Guide to India's Telecom Operators.)
Attached to the letter was a copy of the TRAI’s recommendation that new operators –- including foreign companies –- not be allowed to bid for 3G spectrum, since existing operators have invested heavily in infrastructure and would be able to roll out services more quickly.
It’s not the first time to the two offices have been at loggerheads; disagreements have reared up before over everything from number portability to spectrum allocation.
The companies are in exclusive talks for up to 45 days, following the breakdown of a deal between MTN and Reliance’s domestic rival Bharti Airtel Ltd. (Mumbai: BHARTIARTL). MTN, which operates in 21 countries throughout Africa and the Middle East, could still attract other suitors. (See MTN M&A Latest, MTN Becomes M&A Magnet, and Etisalat Ups Africa Investment.)
It’s worth noting that any M&A deal involving MTN could encounter problems receiving financing from U.S. and European banks because its operations include mobile networks in Iran, Sudan, Syria, and Liberia –- countries that are under political sanctions.
Those four countries accounted for 22 percent of MTN’s 68 million subscribers at the end of March, and Iran in particular is one of its fastest growing markets –- its MTN Irancell subsidiary added 3.02 million new subscribers during the first quarter alone.
The proposed share swap would avoid any cash transaction that would rope in financing from international banks.
Sistema is investing big in India, taking the operator from the single region of Rajasthan to the rest of India where it has been awarded licenses. Shyam recently received CDMA spectrum for the Maharashtra and Kerala circles, or services areas, so that it now has frequencies for 15 of India’s 23 circles. (See Sistema Adds Spectrum.)
In a recent conference call accompanying its fourth quarter and full year results for 2007, then-CEO Alexander Goncharuk said Sistema has a capex budget of $1 billion this year for India, a sum that includes the increased stake in Shyam and the cost of licenses. (See Sistema Appoints CEO and MTS Names New CEO.)
The company is apparently edging out Shyam’s management for the enlarged operator, as Anton Abugov, VP of strategy and development, told analysts on the call: "We're not looking at the existing Shyam Telelink management as the core management for our pan-Indian expansion... Therefore we have strengthened the company with professionals from the Holding level, from our level, and bringing external professionals as well on board."
The TDSAT ruled Wednesday that although Spice will likely lose out, it's in the "larger public interest" for the other operators to receive spectrum and begin rolling out their new networks.
India’s security agencies claim the BlackBerry poses a security threat because emails sent from the device can't be traced or intercepted. The government has requested RIM to either hand over a message encryption key, which the company says it doesn’t have, or set up host servers in India so it can monitor messaging traffic.
RIM has 114,000 BlackBerry users in India on four networks -- BPL Mobile , Vodafone India , Reliance Communications, and Bharti Airtel.
— Nicole Willing, Reporter, Light Reading