The Indian Techonomist: bulletin

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18 MARCH 1996:

India grants more licences, to have 3rd round of bids

March 16, 1996: As expected, the five winners in the second round of bidding for basic telephony held this January were issued letters of intent by the Indian Department of Telecommunications (DoT). The five will have to pay the first year's licence fee for the regions awarded to them - a total of $159 million - by April 10. The winners are, listed in order of decreasing estimated profitability of their regions, Reliance-NYNEX (Gujarat), Tata-Bell Canada (Andhra Pradesh), RPG-NTT-Itochu (Tamil Nadu), Essar-Bell Atlantic (Punjab), and Usha-Moscow Telecom (Bihar).

Two first-round winners, Ispat-Hughes (Maharashtra, including Bombay, and Karnataka, including Bangalore) and Shyam-PTT Guangdong (Rajasthan) have not yet received their licences, as the bids are being disputed in court by losing bidders.

With four licences previously granted to surprise first-round winner HFCL-Bezeq-Shinawatra, there are still eight circles left without a licensee (excluding the troubled state of Jammu and Kashmir, which has received no bids). These include medium-profitability B category circles that were unresolved in the first round due to "caps" - limits - placed on the number of licences per company, and ignored in the second round of bidding (along with poorer C category circles) due to high reserve prices set by the DoT.

The DoT has, on March 15, issued a third tender for these leftover circles, with significantly reduced reserve prices. The only original first-round bidders may participate in this tender, and bids will be opened on April 15. Despite a whole month, and the lower reserve prices (cut by about 30%) uncertainty about general elections expected in early May could leave the DoT wanting. A fourth round will then be held, for any remaining circles, this time open to anybody, probably in August.

Incidentally, the DoT denies that it has reduced the reserve prices at all. It claims it has merely reevaluated the net present value (NPV), which is the bid amount discounted according to the bidder's pay-out plan over the 15-year licence period. As the bid amount is really not important - winners are selected on the basis of the NPV - and only reserve NPVs were ever made public, this is just an ingenuous device to mask the fact that the DoT has followed the typical public-sector habit of overestimating revenues and underestimating required investment.

Basic telephony licences, first- and second-round bids, and the new reserve prices can be found here

Note: Bell Atlantic was Essar's original partner. Now, however, it is expected that Essar will build its network in Punjab with Swiss PTT, which had originally submitted its bids along with Sterling, an Indian computer company diversifying into travel resorts. Sterling is a partner in Essar's cellular operation in Delhi, which has been running for a year now. As for Bell Atlantic, its merger with NYNEX will link it to the latter's Indian partner, Reliance, which has won several cellular licences apart from the basic services licence in Gujarat.

Motorola's Indian cellular service delayed

ModiCom Network, a venture of Motorola and India's B K Modi Group, has asked for more time to pay for the licences to operate cellular services in the Indian states of Punjab and Karnataka, which it won through the bidding process. The Department of Telecommunications (DoT) has announced April 15 as the last date of paying the licence fee for cellular services. Most licences - for two private providers in each of 18 regions across India (excluding the four major cities, which already have cellular services) - have already been granted.

ModiCom has been in some trouble, however, due to the change in its composition since the time of the bids (opened on August 5 last year), when Motorola was not a partner. The B K Modi Group owns 51% while the original partners were Vanguard Cellular Systems Inc (26%) and Telecom International (23%). In January, the Modis received DoT permission to change its partners, but Vanguard refused to leave.

Vanguard has finally agreed to sell out, and ModiCom can be reconstituted. Motorola is expected to take a 20% stake, while 29% will be held by Lazard Asia, the regional branch of the financial firm (49% is the maximum foreign holding allowed in telecom service providers).

Meanwhile, Motorola announced that it is developing alphanumeric pagers in the Hindi and Gujarati languages, soon to be followed by more of India's dozen or more widely-spoken tongues. Motorola is pleased with the Indian pager market (after many false starts, several competing paging services started nationwide last year), especially because of the extremely high penetration of alphanumeric pagers (95%). The pager market is expected to quadruple to some 750,000 subscribers within the second year of service.

More information on cellular services in India is available here

India's National Stock Exchange on the Web

India's National Stock Exchange (NSE) is the country's first exchange with a presence on the Internet's World Wide Web. It makes available to users around the world business news, current stock quotes, and a member's directory through an efficient interface that includes search capabilities.

India's major exchange, the Bombay (now renamed Mumbai) Stock Exchange, switched to screen-based trading last year, as did its counterpart in the capital, Delhi. The NSE, though, is by definition a high-tech exchange - unlike the revamped Bombay and Delhi exchanges, the NSE never had, and does not retain, a trading floor. The NSE does not have offices; its member-brokers are scattered across the country, and trade through the VSAT links that connect their computers, making it somewhat similar to America's NASDAQ.

The NSE web site is at and was designed by US-based Thaumaturgix Inc and an Indian financial technology consultancy, JCS Pvt Ltd.

BBC to go its own way in Asia

The British Broadcasting Corporation's BBC World news channel will separate from Rupert Murdoch's Star TV network across Asia on April 1. It will move from the AsiaSat 1 satellite to Panamsat 4 (which ironically also broadcasts BBC's American rival, CNN). The BBC has been part of the Star network since its founding in 1991 by the Hong Kong billionaire Li Ka-shing. Ever since Star TV was sold to Rupert Murdoch's News Corp - whose BSkyB network competes with the BBC in Europe - the Star-BBC relationship has been shaky. It reached its nadir when, after a BBC documentary critical of Chairman Mao, the channel was dropped from Star's northern beam.

In the area covered by the southern beam - much of South-East Asia, West Asia, and especially India - the BBC is very popular, and claims a 25% viewership. The BBC now plans to develop local content, and broadcast programmes in Hindi, on a free-to-air channel. Despite the expiry of its broadcasting contract with Star, the BBC will still use Star's extensive marketing network, perhaps because it plans to broadcast along with Star on the encrypted (pay) channels on Asiasat 2.