Jio is now the largest telecom player in both revenue, market share: Report

Source: LiveMint.com, Jan 28, 2019

NEW DELHI: Reliance Jio has become the largest telecom player by revenue and subscriber base, India Ratings said on Monday. Reliance Jio Infocomm Ltd has remained aggressive in subscriber acquisition and has become the largest player in terms of wireless subscriber market share, broadband subscriber base and revenue, it said.

The increase in Reliance Jio’s subscriber base is largely at the cost of Vodafone Idea Ltd, whose subscriber market share has declined consistently in last two years.

Revenue market share of RJio’s also grew to 34.9 per cent in 2QFY20, which is the highest in the industry compared to other players, the agency said.

India Ratings also said that the industry is showing signs of recovery.

The average revenue per user (ARPU) reported by telecom companies has started showing signs of recovery in the last two to three quarters. Moreover, the recent tariff hikes by telcos in the range of 25 per cent to 35 per cent is likely to support the increase in ARPU over the next few quarters. Furthermore, the share of broadband subscribers in the overall subscriber base is on a continuous rise.

“The rising share of data subscribers along with growing data traffic and stabilising data tariffs augurs well for revenue growth in our view,” it said.

It also said that the release of a consultation paper by Telecom Regulatory Authority of India (TRAI) in December 2019 to evaluate setting a floor price for telecom tariffs is a positive move for the telecom industry in its view. Additionally, some sense of relief to the telcos was also provided by the extension of the implementation of zero interconnect usage charge regime by a year, the agency said.

TRAI has extended levy of ₹0.06/minute till December 2020 from December 2019 earlier. As a result, the effective date of implementation of the regime has been postponed to January 1, 2021. Indian Ratings has downgraded VIL’s long-term issuer rating to ‘IND BBB-‘ from ‘IND BBB’ while maintaining it on rating watch negative. The downgrade reflects the crystallisation of adjusted gross revenue related liabilities for VIL post the Supreme Court’s adverse ruling on January 16, dismissing the review petition filed by telcos. The SC ruling provides clarity on the liabilities that are payable by VIL to the Department of Telecom, which was earlier contingent upon the outcome of the review petition, the agency said.

India’s mobile handset exports more than double

Source: Financial Express, Jan 27, 2019

Mobile handset exports from India have more than doubled in the first eight months of the current fiscal year. This is on top of a 132 per cent growth rate in the last fiscal as well. The overall exports of mobile handsets from India were USD 2.6 billion in FY19, which has reached nearly USD 3 billion till November in the current fiscal, according to the Department of Commerce. After getting a boost from Narendra Modi-led government’s flagship campaign – ‘Make in India’, the industry is expected to get further incentives to increase its productivity. IANS had reported that a special incentive scheme for the manufacture of mobile handsets and components may be unveiled in the upcoming budget. 

The government has already approved a special incentive package to promote large-scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector, which is called the Modified Special Incentive Package Scheme (M-SIPS). Under M-SIPS, the government aims to provide a subsidy of 20 per cent on capital investments in special economic zones (SEZs) and 25 per cent on capital investments in non-SEZs for individual companies.

Lucrative incentives and facilities in India have now been attracting premium mobile handset brands like Apple and One Plus, giving more value to the burgeoning sector. The production of mobile phones in India has shot up 8-folds in the last five years. Mobile phones worth $ 24.3 billion were manufactured in 2018-19, which was just $ 3.1 billion in 2014-15, according to the RBI annual report. 

Meanwhile, Phased Manufacturing Programme (PMP) for mobile handsets and its related sub-assemblies introduced in the Union Budget 2015-16 also led to a jump in mobile handset production in India as it involved countervailing duty on mobile phone imports and differential excise duty for domestic mobile phone manufacturing. It has gave exemption of parts, components, and accessories of mobile phones from basic customs duty to encourage domestic manufacturing of mobile phones.

A $21-billion telco war comes down to $2; consumers jump into the fray

Source: Business Standard, Jan 23, 2019

India’s great telecom melee was bad enough as a brawl between service providers and the state, with operators complaining about the government’s outlandish claims on their past revenue. Now, consumers have jumped into the fray. A confusing three-cornered fight could lead to ugly outcomes: The country’s broken financial system would take a fresh hit; new 5G networks could be delayed; and the government’s annual revenue from the sector might get squeezed.

This week, the government wants nearly Rs 1.5 trillion ($21 billion) in back licence fees and spectrum usage charges, including penalties, interest and interest on unpaid interest. Before they lost the case in the Supreme Court, the telcos maintained the government’s interpretation of what it was owed under the 1999 revenue-sharing agreement to be too broad and unfair because it included even their non-telecom revenue, such as interest and dividend income.

It’s a Pyrrhic victory for the government because not all the money it wants is coming. Of the 15 firms facing these long-contested demands, most have shut down, sold out or ended up insolvent. All eyes are now on Vodafone Idea, one of the three private-sector mobile services companies still standing. It has to pay Rs 53,000 crore by January 23, by government estimates. Even taking Vodafone Idea’s own calculation of the liability at Rs 44,200 crore, the loss-making carrier’s net debt soars to a life-threatening Rs 1.6 trillion. It may not be able to meet all its obligations.

The threat of a bankruptcy was real when I wrote about Vodafone Idea’s grim prospects in November. With the two large shareholders — Britain’s Vodafone and Kumar Mangalam Birla — reluctant to throw more good money after bad, the equity value of the business is hurtling toward zero.

Telcos have requested the top court to extend the payment terms. Even if Vodafone Idea stays afloat thanks to a last-minute compromise, customers have read the writing on the wall. The mobile carrier lost 36 million subscribers in November. And that was before all three players raised prices in December. As the churn gets busier, the hypercompetitive Indian market will effectively turn into a duopoly. Bharti Airtel and Reliance Jio Infocomm will see their market shares settle at around 35 per cent and 45 per cent, respectively, by March 2021, according to Jefferies Financial Group.

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Government approves up to 100 per cent FDI in Bharti Airtel

Source: The Economic Times, Jan 22, 2019

MUMBAI: The telecom department has approved raising the foreign direct investment (FDI) limit in Bharti Airtel to 100% from an earlier 49%, a provision that can help the telco draw more overseas funds.

“Bharti Airtel has received the approval from Department of Telecommunications vide its letter dated January 20, 2020, for increasing the limit of foreign investment up to 100% of the paid-up capital,” the telecom company said in a regulatory filing on Tuesday.

“It may also be noted that subject to applicable laws, the aforesaid approval read together with the RBI (Reserve Bank of India) approval dated July 3, 2014, granted to the company allows the FPls/ Flls to invest up to 74% of the paid-up capital,” Bharti Airtel said in the statement.

The clearance to raise foreign investment levels came after the combined holding of the promoter and promoter group in Airtel fell to 58.98% from 62.70% after the company raised $2 billion through a private share placement to investors, which included GIC, Fidelity, BlackRock, Goldman Sachs, Citigroup, Schroder, Warburg Pincus and Segantii Capita.

Currently, foreign ownership in Bharti Airtel is 44.28%, after the share placement.

Industry watchers say that to raise their stake back to the previous levels, the promoter group – Mittal family and SingTel – would need to infuse more capital into Airtel, via Bharti Telecom. Bharti Telecom had reportedly sought the government’s nod for Rs 4,900 crore of investment from SingTel and other overseas entities.


Currently, Sunil Mittal and family owns around 52% in Bharti Telecom, which in turn owns less than about 40% stake in Bharti Airtel after the recent share sale. SingTel owns 48% in Bharti Telecom.

And if Bharti Telecom raises funds from its current promoter group – that may include its own overseas entities and SingTel – in proportion to their holdings, overseas stake could cross 50%.

Even a marginal increase in foreign equity would take the foreign investment in Bharti Telecom above 50%, making it a foreignowned entity. Once that happens, Bharti Telecom’s entire stake in Bharti Airtel will automatically be considered foreign investment, Bharti Airtel had said previously.

Indian Telephone Industries plans to raise Rs 1,600-crore through FPO

Source: Business Standard, Jan 20, 2019

Mumbai: State-owned Indian Telephone Industries (ITI) will have a Rs 1,600-crore follow-on public offer (FPO) on Friday. The FPO comprises fresh issue of up to 180 million equity shares. An additional issue constituting up to 1.8 million shares will be reserved for employees.

The issue will open on Friday, January 24 and close on Tuesday, January 28, the company said in a statement on Monday. The last FPO to hit the market was in 2014 by state-owned Engineers India. Market players said FPO as a fund raising instrument has lost its appeal, as companies these days opt for newer methods like offer for sale (OFS) or institutional placement programme (IPP).

The price band for the FPO will be announced on Wednesday. Proceeds of the issue will be utilised towards working capital requirements, repayment of loan taken by the company, and for general corporate purpose. On Monday, shares of ITI ended at Rs 103, down 0.3 per cent. The company has a market cap of Rs 9,226 crore. The public issue is being managed by BOB Capital Markets, Karvy Investor Services and PNB Investment Services. The FPO will help the company meet Sebi’s requirement of minimum 25 per cent public shareholding.

The government holding in the company is currently at 90 per cent.

ITI is into manufacturing of a diverse range of Information and Communication Technology (ICT) products and solutions. Its customers include BSNL, MTNL, defence, paramilitary forces and state governments. The company has a strong order book of Rs 11,051.12 crore as on December 2019, which includes various government projects such as ASCON, BharatNet, Network for Spectrum, smart energy meters, space programs and e-governance projects. ITI said it is looking to leverage their relationship with the Centre and various public sector units, modernise its infrastructure and technology, as well as team up with innovative technology leaders and start-ups.

Huawei likely to conduct trial runs of 5G waves for Airtel, Vodafone

Source: Economictimes Indiatimes, Jan 16/2020

Chinese telecommunications equipment maker Huawei is expected to conduct 5G trials for Bharti Airtel and Vodafone Idea, sources said, as the central government finalises the trial runs before the spectrum auctions.

Sources said both Airtel and Vodafone have also joined ZTE, Nokia and Ericsson, apart from Huawei, for conducting the 5G trials. Reliance Jio will rope in South Korean equipment maker Samsung.

State-owned BSNL is also likely to go with ZTE. The firms have submitted applications for 5G trials, industry sources said.

The Chinese firm had had come under a cloud after there were allegations that its electronic and telecom devices helped China to spy on US corporations and agencies. The firm has been barred in Australia and Japan, but welcomed in Russia, Turkey and Saudi Arabia.

The central government had even constituted a committee headed by its principal scientific advisor to decide on Huawei’s participation in the 5G trials. The trials would establish use cases in the country as a precursor to the full-fledged launch of 5G services.

However, last month, Telecom Minister Ravi Shankar Prasad had said the government will allocate airwaves to all telecom service providers for conducting trials of super-fast 5G network, and will not bar any equipment suppliers in the trials. The stance had spelt relief for Chinese telecom gear maker Huawei, which rivals western equipment makers such as Ericsson and is facing curbs in the US.

Huawei India CEO Jay Chen had earlier stated the company firmly believes that only technology innovations and high-quality networks will be the key to rejuvenating the Indian telecom industry.

“We have our full confidence in the [Prime Minister Narendra] Modi government to drive 5G in India. We have our full confidence in Indian government and industry to partner with best technology for India’s own long-term benefit and also for cross-industry development,” Chen had recently said.

When contacted, Rajan Mathews, director general of industry body Cellular Operators’ Association of India (COAI), said, “We are pleased that Department of Telecom (DoT) is progressing with the 5G trials to ensure the implementation of National Digital Communications Policy.”

Improving data speed

The Union government has begun the process of auctioning 5G spectrum with the aim of improving data speed and bringing in Internet of Things (IoT), which will further enable robotic surgeries, driverless cars, among other things.

On December 20, the Digital Communications Commission (DCC) — the apex decision-making body — at the telecom department approved the auctions across 22 circles. A lion’s share of 6050 MHz has been set aside for 5G spectrum, trials for which are widely-expected to begin between January and March.

Airtel to mop up $3 billion in mega fundraise plan

Source: LiveMint.com, Jan 09, 2019

NEW DELHI/MUMBAI : Bharti Airtel Ltd on Wednesday launched a qualified institutional placement (QIP) worth $2 billion at a floor price of ₹452 per share, as well as a separate fundraise exercise through issue of foreign currency convertible bonds (FCCBs) of up to $1 billion.

The operator, hit by a court verdict that has mandated it to pay dues of ₹35,586 crore to the department of telecommunications (DoT) by 24 January, will use a chunk of the proceeds to meet this liability. “The company proposes to utilize the net proceeds for any payments that may be required to be made arising out of the judgment of the Supreme Court of India delivered on 24 October in relation to a long outstanding industry wide case in respect of the definition of adjusted gross revenue (AGR),” Airtel said on Wednesday.

Bharti Airtel posted a loss of ₹23,045 crore in the Sep quarter, its highest and second quarterly loss in 14 years.

The fundraise exercise comes more than two months after the 24 October order of the Supreme Court upholding the government’s definition of revenue that includes revenue from non-core telecom operations such as rent, dividend and interest income. Licensees have to pay 8% of their AGR as licence fee to DoT. The verdict settled a 14-year dispute between DoT and operators.

The latest share sale comes less than a year after Airtel raised ₹25,000 crore through a rights issue in May 2019.

Bharti Airtel also plans to use the proceeds from the QIP to augment its long-term resources and strengthen its balance sheet, for servicing and/or repayment of short term and long term debts, capital expenditure, and long term working capital requirements, among others, it said on Wednesday.

The proceeds of the FCCB issue will be used for capital expenditure, repayment of existing indebtedness, and/or any other use as permitted under applicable laws and regulations from time to time, Bharti Airtel said.

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