Copyright (C) 1996, Rishab Aiyer Ghosh (rishab@techonomist.dxm.org)
Tel +91 11 2454717; Fax 2209608; A4/204 Ekta Apts, 9 I.P. Extn New Delhi 110092
INDIA
May be distributed electronically provided that this notice is
attached.
April 15, 1996: The Indian government's third round of bids for leftover basic telecom licenses met a miserable response. Bids were allowed for a whole month, but only one bid was received by the today, when bids were to be opened. Bharti Telenet, whose Indian partner runs the cellular network in Delhi and has received the cellular licence for the northern state of Himachal Pradesh, bid $190.5 million for the giant central state of Madhya Pradesh with its Italian partner, STET.
This amount is to be paid out to the government over the 15-year licence period. The Net Present Value (NPV, bid amount discounted according to payout plan) was calculated as $73.6 million, somewhat higher than the government's reserve price of $58.5 million. The Department of Telecommunications (DoT) is expected to sign a letter of intent with Bharti over the next few days.
Bharti submitted its bid eight minutes before the 11 a.m. deadline, presumably waiting over the past month to see whether anyone was interested in bidding in this third round. Shyam Telecom, which has licences for cellular services in the north-eastern states bordering on Myanmar and China, as well as the desert state of Rajasthan, waited too long. Shyam's representatives presented their bids a few minutes after the deadline, and with Bharti protesting, were rejected by the DoT.
Shyam Telecom is expected to receive the licence for basic telecom services in Rajasthan. This, and Hughes-Ispat's licence for the state of Karnataka (including state capital Bangalore), was a disputed result of the first round of bids opened last August. However, tenders for these circles (regions) were not issued in the second round (in January; it received all of six bids) or the third one, so the dispute, over the proper evaluation of their bids, should be settled eventually.
That dispute as well as the poor response to the second and third rounds were largely the result of the DoT's muddled decision to impose reserve prices, which were announced well after the first-round bids were opened. They were reduced by as much as 30% for the third round, but this was obviously not enough.
Nothing further is expected on the remaining seven licences, mainly for basic telephony in relatively poor (but potentially quite profitable) parts of the country, until the general elections to be held between April 27 and May 7 this year. Results are expected by May 14, but the coalition politics to which India is unused may cause delays in forming a government with the time to think about telecom privatisation. Eventually, another round of bids may be expected in June or July, this time open to all (rather than only the original first-round bidders), probably with reserve prices significantly reduced or eliminated. Hopefully the next government will undo the grave error of this one: it allowed its greed for licence revenues to overshadow India's need for investment - the investment which was the justification for privatisation in the first place.
Basic telephony and cellular licences, and rounds one, two and three of the basic bids can be found at http://dxm.org/techonomist/news/bids.html
Note: "Basic telephony" includes fixed-wire, wireless in local loop, and multimedia services. See http://dxm.org/techonomist/reguconv.html
April 15: Sony is to set up a software centre in India, according to Sony India Managing Director Yoshio Kubo. At a seminar in New Delhi organised by the company, Mr Kubo said that India's skilled software engineers would be useful for Sony's ventures in computer software. The Sony software development centre will probably be located in Bangalore, the heart of India's software export industry, where a similar seminar will be held on April 18.
Mr Kubo also acknowledged India's huge production of audio-visual software - the country is the world's largest producer of movies, making over twice as many as Hollywood - and suggested that Sony could use this content in its other projects. Sony Entertainment runs one of the many satellite channels over India, with programming entirely in the Hindi language.
Sony TV is distinctly downmarket, with Hindi game shows, Hindi soap operas and the obligatory "film-based programmes" that string together the song-and-dance sequences that fill Indian movies. Sony is believed to be spending well over $30 million to sustain the channel in its first year, but its lowest-common-denominator tone is already bringing it advertising. It charges advertisers much less than its main competitor, Zee TV. Zee is part of Rupert Murdoch's four year-old STAR TV network, and is its most profitable channel. Zee also provides a steady diet of Hindi game shows, soap operas and film-based programmes, with some Arabic-language serials thrown in during small hours (which are late-evening prime time in West Asia).
The state-owned Doordarshan network, which has nearly twenty channels, still hogs some 70% of the advertising (total 1995 TV spend: $280 million), as it is the only network that can broadcast from within India. Most of that revenue goes in turn to Doordarshan's Metro channel, which survives on - what else? - Hindi game shows, soap operas and film-based programmes.
For more on India broadcasting reforms, see the Techonomist bulletin for April 1, at http://dxm.org/techonomist/news/