Action Stations

Quite clearly, investment banking circles have been delighted with the current turn of events and are visibly optimistic about more deals to follow.

One senior investment banker points out that the FDI cap in the sector being hiked to 74 per cent will result in more number of players coming in. ‘‘There are overseas players who are taking more than a close look at the Indian market.’’

There are several names doing the rounds; among these are Vodafone, China Telecom, Verizon, Telstra and NTT DoCoMo. What is interesting is that some of these players have already been in the Indian telecom market and the rest are first-time entrants. Vodafone’s 20 per cent holding in RPG Cellular for the Chennai circle was sold to Aircel for about $7 million (around Rs 30 crore at that stage) late last year, while Telstra sold its holding in Modi Telstra, which was operating in the Kolkata circle, to the Modis over four years ago. Some observers opine that some of these exits were cases of a ‘‘distress sale’’ or a notion that regulation and technology were not clear.

Things appear to have changed since then. ‘‘Today, overseas players will not want to be out of this market,’’ says Cellular Operator Association of India (COAI) Director General TV Ramachandran. He emphasises on the fact that India is a high-growth rate market with 40 percent of the mobile users being less than 25 years of age. Foreign players themselves are still extremely circumspect about speaking on their plans for India. While officials at China Telecom and Deutsche Telecom did not respond to email queries, European telecom giant Vodafone’s spokesperson only said, ‘‘India is a large and an interesting market though there are no specific plans.’’ This is in the midst of considerable speculation that Vodafone is seriously looking at India. Telstra and Telekom Malaysia are said to be in talks with AT&T Wireless to acquire its 33 per cent stake in Idea Cellular; this is the US wireless giant’s only holding in India.

The hike in FDI cap to 74 percent from the current level of 49 per cent will surely give a fillip to the industry. ‘‘I think this is the right time for the overseas players to come in,’’ says Gartner India’s Principal Analyst (Telecom) Kobita Desai.

Emphasising that most issues related to regulation have been settled, she maintains that 2004 and 2005 will be peak growth years. ‘‘We will see high double digit growth rates in the region of 70-80 per cent per annum upto 2006. While it will stabilise after that, India will remain one of the highest growth rate markets,’’ adds Desai. Foreign entrants are looking for control in some form and this is difficult in the current situation. The 49 per cent cap also prevents the foreign partner to bring in more money even if they want to. Significantly, the government has already given its go-ahead for intra-circle M&As subject to certain conditions.

India is a huge emerging wireless market and as Ramachandran points out, it will have close to 470 million subscribers by 2010. That is something that will be difficult for the global telecom majors to ignore.