Sovereign Wealth Funds to Invest in India’s Oil Exploration Sector

E&Y report also lists China’s SWF as possible investor in India

Ernst & Young has come out with a new report that forecasts India will receive up to USD10 bn of investment in oil exploration and production sector. Interestingly, report also suggests that Sovereign Wealth Fund (SWFs) of Mid-east, Singapore and China would be making such future investments in India’s oil and gas exploration. Also, exploring there chances would be much reluctant Japanese Banking institutions, which so far don’t have a bigger presence in India.

SWFs are surprise entrant to the Indian exploration market. SWFs have been making huge investments in energy sector focused around Mid-east and Africa region but India was never on its target as most of the investment is directed towards securing it energy needs. E&Y has unexpectedly included SWFs from China, which have been in forefront of securing China’s growing energy need and have been competing with India on foreign acquisitions.

India opened its oil and gas exploration sector for private players through New Exploration and Licensing Policy in 1998, so far seven rounds have taken place and 207 blocks have been awarded to the participating companies. This has brought down the average unexplored acreage in India’s total sedimentary area to 15% in FY07 from 41% in FY '99.

DTH services to open up for Interportability

Government is finally waking up to allow real competition into the DTH market. Till now, there is no portability amongst the DTH player which gives players upper hand in pricing ones the subscriber chooses a particular service as the subscriber can no longer switch to other service without incurring huge cost.

Lack of regulation on the technology front has resulted into lack of uniformity amongst the DTH players, though the two biggest players, Tatasky and Dishtv, use MPEG 2 technology the new entrants into the market are using MPEG 4 technology. The Ministry of Information and Broadcasting has asked the Bureau of Indian Standards (BIS) to draft a norm on DTH setup box technology, which will enable Interportability of services.

This decision will benefit the present subscribers which are estimated at around 6.4 million. But, this decision will have major impact on the future growth of DTH market as consumers will find it more attractive to have DTH service with Interportability feature. DTH segment has attracted two new players in recent months and is expected to heat up the competition and growth of this segment.

Kingfisher-Jet Collaboration ends Liberalisation with Cartelisation

The Kingfisher-Jet Air deal is cruel reminder how corporates can masquerade collaboration for cartelisation. Though there is nothing wrong in the cost rationalization objective of the deal. But, as pointed out by the two owners of the airlines that the deal will directed towards route rationalization. In other words two airlines will effectively kill competition on smaller routes, where only either of the airlines will fly at certain point of time. This will reduce the option available to the customers and will eventually kill the price difference available to customers.

The new alliance will have the quasi power in deciding the ticket pricing. The impact will be on airline service cost for ‘B & C class’ cities, where fare may rise more steeply than those in four metros. The fare reduction mantra which both these companies is mere public posturing in the current environment and is more aimed at diverting attention from negative response on some of the deal aspects. These heavily loss incurring airlines wouldn’t reduce fares, if they had to, they would have done it when government had announced tariff reduction on ATF.

Indian Consumers now to Access IPTV for Entertainment

Setting the path for consumers in India to get access to television content over broadband internet, the government approved guidelines for allowing broadcasters to share their content with Internet Protocol Television (IPTV) providers. The present norms allow broadcasters to share their channels only with cable and direct-to-home platforms. IPTV service will not be costlier than DTH or cable providers as the government has also made it clear that that IPTV provider would get channels from broadcasters as per broadcasters’ rates fixed by TRAI.

IPTV is a new platform for delivering television content using an IP network and high speed broadband technology. The rapid development in telecom technologies along with increasing digitalisation of broadcasting is driving services like IPTV. For consumers, the move will mean access to interactive content on what will be a two-way link, enabling services such as video on demand, time shift TV, group-gaming and interactive advertising.

The decision to amend the laws is likely to benefit telecom players such as Bharti Airtel, Reliance Communications and BSNL. MTNL had already started offering IPTV services in Mumbai and it would have first mover advantage. BSNL has also entered into a tie-up to make a foray into IPTV service.

Internet service providers (ISPs) whose net worth is more than Rs 100 cr will also be able to offer the services. However, only two or three ISPs would be able to offer this service, as only those many have net worth above the prescribed limit. Broadcasters would however benefit to great extent as the current cable and DTH platforms are struggling to carry more than 200 channels, while there are 360 channels with down linking permission waiting on the anvil, which will be benefited by IPTV. The IPTV platform also presents cable operators an opportunity to move closer to complete digitization and also offer a service with potential for higher billings per customer.

Telecom Regulatory Authority of India (TRAI) had submitted its final recommendations for IPTV to the Information and Broadcasting (I&B) Ministry several months ago, but it got approval only now. The other recommendation to increase foreign direct investment (FDI) in IPTV services to 74% as opposed to the current 49% in the cable sector has still not been approved. The regulator also authorized the department of telecommunications (DoT) to permit any telecom licensee to provide IPTV services. Any cable operator registered under the Cable Television Network (Regulation) Act, 1995, also does not need an additional license for IPTV services.

The content transmitted on IPTV will come under regulation by multiple agencies. While, the ministry of I&B will ensure adherence to the programming and advertising code, the ministry of communications and information technology and DoT will monitor the Internet content as per the IT Act of 2000.

With 40 mn landline connections capable to deliver IPTV, the future looks bright for the service. According to a December report by industry body ASSOCHAM and consultant Ernst and Young, IPTV will garner one million subscribers by 2010.

3G Services & Number Portability to finally hit India; Delhi Mumbai circle tough challenge for Indian Telcos

India’s telecom subscribers are finally going to see the light of the much hyped and discussed 3G services and number portability. The government unveiled its plan to take India’s mobile revolution to the next technological level by opening 3G spectrum auctions to global players that would allow better multimedia services and also quick data and video transfer. Government also announced the first step towards number portability, a major consumer-friendly move that will let the users to switch their mobile operators without losing their numbers.

The 3G spectrum will be initiated in the next 15 days under the supervision of an independent agency to ensure full transparency, there would also be strict roll-out obligations to avoid spectrum hoarding. The Auction is expected to garner around Rs 30,000 cr (around $7 bn) to the government exchequer, a huge respite for the government during the current phase of rising global oil prices, huge subsidy payouts, double-digit inflation and slowing growth.
Currently the country has 60 Mhz of 3G spectrum available, the auction will take place in the 2.1 Ghz band, with 3G services likely to be available by the mid-2009. Initially, only two to five operators would be allowed to offer 3G services in each circle. However in the Delhi and Mumbai circles, only one operator would initially be allowed to offer 3G services, apart from State-owned MTNL due to spectrum crunch. Similarly, for the rest of the country the other government telecom giant, BSNL would get 3G spectrum. The base price for a pan-India license will be Rs. 2,020 cr for each bid, while UASL fee would be Rs. 1,650 cr.

The government also took concrete steps towards introduction of mobile number portability (MNP) by announcing guidelines for an MNP service licence. MNP would first start in the four metros in next two months and subsequently roll out in rest of the country over the next 6-12 months. According to the guidelines, the whole country will be divided into two MNP zones consisting of 11 service areas with two metros in each zone. The MNP service provider and the mobile operators would not be allowed to have equity (direct or indirect) stake in each other's operations. No single company/legal person/the MNP License applicant or MNP Licensee company either directly or indirectly will have any equity, in any of the telecom service provider (basic service, UAS, Cellular Mobile, NLD or ILD) and vice-versa.
The government would allocate the licenses for MNP soon and the eligible applicant should have an experience of operating successfully, number portability solution for a mobile subscriber base of not less than 25 mn in one or more countries for at least two years. The applicant company shall also be required to have a minimum paid up capital of Rs 10 cr on the date of application and a networth of Rs 100 cr. The applicant company or its share equity holders having direct equity of 26 per cent or more in the company should have the required experience. Also, the government has fixed one-time, non-refundable, entry fee of Rs 1 cr for the grant of MNP services license and the company shall have to pay annual license fee of one per cent of the Adjusted Gross Revenue. According to method of selection, the pre-qualified applicants/bidders shall be subjected to a "techno-economic Evaluation" for final selection. The MNP license shall be for a period of five years and can be extended by another five years by the Department of Telecom.

What is 3G?
3G represents the next step in the evolution of mobile telephony, offering markedly greater capacity and efficiency than the current 2G systems. While 2G is focused on voice, 3G supports high-speed data of at least 144 kbps enabling broadband internet access on the mobile, and ‘‘triple play’’ features like mobile TV and converged communication services.

What is MNP?
MNP allows subscribers the freedom to retain their mobile number while switching over to a different service provider. The system when implemented will allow consumers more choice, lower prices and significantly better quality of service.