Three big deals and the second transformation of Indian telecom | india | Hindustan Times
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Three big deals and the second transformation of Indian telecom

india Updated: Jun 13, 2010 22:14 IST
Highlight Story

If there was an award for a biggest possible telecom deals being closed in the shortest possible time, it would have gone to the week ending June 12. I would call it the week that transformed India’s telecom — again.

First, the BWA (broadband wireless access) auction closed by raising Rs 38,617 crore. Add this number to the money raised by the third-generation (3G) auction, this has bloated the government’s coffers by Rs 106,000 crore, three times more than the expected Rs 35,000 crore. Taken together, this will reduce India’s fiscal deficit to 5 per cent from 5.5 per cent, making India’s balance sheet more attractive to global investors.

More important, it will see broadband access getting more widespread and becoming the base to providing e-governance platforms across various states and offering the communications revolution one rung lower. Expect an explosion of action here.

The success of 3G auction proves, once and for all, that for any scarce resource such as spectrum, gas, crude, iron ore and coal — I have deliberately chosen the most controversial — the best return to the exchequer is to get interested players to bid in an open and transparent manner. Going forward, this auction will be the benchmark for all natural resource management, driving corruption and lobbying out of the arena.

Next, Sunil Mittal closed the $10.7 billion (Rs 50,800 crore) deal to acquire the Africa operations of the Kuwait-based Mobile Telecommunications Co KSC, which owns the Zain brand, in 15 countries — a move that will take India’s most successful telecom company to the continent of hope. “I started with Rs 50,000 in my pockets,” he told Hindustan Times. “Today, I'm signing a cheque of Rs 50,000 crore.”

This also signals the corporate arrival of India Inc on a global scale in the services space. So far, only Tata Steel’s $12.2 billion (Rs 57,000 crore) purchase of Corus has matched this deal on the industrial side. To have Bharti offer telecom services in the treacherous regulatory jungle of Africa is going to be a challenge that we will track closely. Mittal already plans to take a price war there, with a tower restructuring waiting on the aisle. Will he be able to replicate the India success in Africa? We wait to see the results.

And finally, the embrace of the Ambani brothers got tighter, with Anil stepping aside in the BWA auction and allowing Mukesh to enter the broadband space in 22 circles — the largest player — by buying 95 per cent in the Nahata-promoted Infotel Broadband Services Pvt Ltd. This was an amazingly well-planned deal — Anil not bidding, Infotel winning the all-India bid, and getting taken over the same day.

As if that were not enough, for the past five days the two brothers, their wives Nita and Tina, and their children have been enjoying a South African safari at the Kruger National Park. The last time the brothers were in this park together was 10 years ago, in 2000 with their parents Dhirubhai and Kokilaben.

With this, Mukesh returns to telecom, after a five-year-long vanvaas — a June 2005 settlement with Anil prevented him from entering this space. Expect more action here, particularly on the price front. Also expect the possibility that the brothers will run the telecom business together, as a single entity. By offering his towers to Mukesh, Anil has already written the prelude to that restructuring.

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