Reliance Media Powerhouse in Making Buys stakes in Cable,Broadband and Content

19 Jan, 2012
Energy,Telecommunications

Reliance Industries which is India’s biggest oil and gas company is set to become one of India’s largest media players as well. Reliance with its massive war chest of cash has been buying stakes in both content generation and delivery across the spectrum in India. The company recently bought controlling stakes in one of the largest TV broadcasters Network 18 coupled with its earlier stake in Eanadu . Reliance  earlier bought the broadband spectrum rights for broadband transmission in a deal with over $1 billion.

Reliance Industries the biggest private company in India with billions of dollars in free cash flow being generated by its oil and gas business,is set to make a  massive investment into the broadband business through 4G. Reliance which is primarily an oil and gas company is investing heavily into Retail, Financial Services and Media. The company is set to become a media behemoth after buying substantial chunks into the content business of NW18 and Eenadu network.

Reliance has a massive balance sheet which is has used strategically to acquire 4G spectrum (Infotel) and content.The company had revolutionized the telecom space through the Monsoon Hungama campaign when it had provided super cheap telecom  mobile plan with handsets. It could do the same in the Internet space through providing super cheap Tablets like Aakash with super cheap broadband plans on 4G. It already has content to provide its subscribers.Note broadband companies in India provide poor service at high rates, so Reliance can takeover the broadband space in India easily if it executes right.

With voice becoming a commodity with super low or free pricing,data is the only way to earn money for telecom companies in India. If Reliance executes its strategy right,then these telecom companies like Idea,Vodafone,Airtel would see their revenues and valuations crushed.

The company is planning to introduce a big bang plan for broadband  coupling a cheap tablet with a cheap monthly plan. This is on the lines of a mobile phone with a monthly connection. Reliance has a  good chance of winning the broadband market which remains under penetrated and high cost. It poses a direct existential threat to India’s telecom companies which have failed to compete on data effectively.

Reliance in continuation of its strategy in the media industry has bought a small stake in Den Networks one of India’s largest cable networks though one its subsidiaries. The company is slowly and methodically capturing the entire media development and delivery network  in the country. The stake in the cable companies will give it leverage to deliver its broadband and content.

Reliance Strategic Investments, a subsidiary of Reliance Industries, has bought a 1.14% stake in DEN Networks, one of the two listed cable distribution companies in India. As RIL has acquired interests in media firms dealing with content, it makes sense for the Mukesh Ambani-controlled group to invest in a distribution network now, several analysts told ET.

Mainstream Media Content Scraping Stupidity – Linking Indian Skyscrapers with Economic Crashes

11 Jan, 2012
Indian Markets,Telecommunications

Mainstream Media gets more and more stupid by the day . Indian mainstream media organizations are going crazy linking the building of skyscrapers in India to a coming economic crash. Note there is a popular theory that the building of highest skyscrapers leads to economic crashes in the future. There are cases of this happening Chicago in 1930 and the Burj Dubai in the 2000s .However portraying this as definite proof and linking is highly stupid to say the least without examining the full facts

Popular Indian mainstream media organizations are spreading a report by Barclays that links the building of tall skyscrapers in India and China to an imminent crash in the economies of both . Note China has been building skyscrapers for a long time and the real estate downfall has already started . India is barely building 4-5 skyscrapers none will be the highest , so the Indian theory is even more specious. However the content scraping mainstream media outlets continue to propagate the story to the top of the news

The original story from Reuters

An “unhealthy correlation” exists between the construction of skyscrapers and financial crashes, according to a new report from Barclays Capital.The construction of the Empire State building in New York in 1930, along with towers in Kuala Lumpur in 1997 and Dubai in 2010 have all been followed by economic crises, the report noted.”Often the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction,” it said.

“The completion of Petronas Towers in Kuala Lumpur in 1997 was followed by a region-wide economic crisis and the collapse of Asian currencies,” it added.Investors should pay special attention to China, the Skyscraper Index warns, as the “biggest bubble builder” is currently erecting 53 percent of the 124 skyscrapers planned over the next six years.China currently has 75 completed buildings above 240 metres in height.India has just completed two new skyscrapers, with 14 more already under construction.

Scary Big Bang Broadband/ Media Invesment by Reliance Behemoth could crush Indian Telecom Companies

7 Jan, 2012
Telecommunications

Reliance Industries the biggest private company in India with billions of dollars in free cash flow being generated by its oil and gas business,is set to make a  massive investment into the broadband business through 4G. Reliance which is primarily an oil and gas company is investing heavily into Retail, Financial Services and Media. The company is set to become a media behemoth after buying substantial chunks into the content business of NW18 and Eenadu network.

Reliance has a massive balance sheet which is has used strategically to acquire 4G spectrum (Infotel) and content.The company had revolutionized the telecom space through the Monsoon Hungama campaign when it had provided super cheap telecom  mobile plan with handsets. It could do the same in the Internet space through providing super cheap Tablets like Aakash with super cheap broadband plans on 4G. It already has content to provide its subscribers.Note broadband companies in India provide poor service at high rates, so Reliance can takeover the broadband space in India easily if it executes right.

With voice becoming a commodity with super low or free pricing,data is the only way to earn money for telecom companies in India. If Reliance executes its strategy right,then these telecom companies like Idea,Vodafone,Airtel would see their revenues and valuations crushed.

Telecom Industry in India

The Indian telecom industry is the world’s fastest growing industry with 792 million mobile phone subscribers as of February 2011. It is also the second largest telecommunication network in the world in terms of number of wireless connections after China. The industry will reach around $80 billion in revenues by next year showing an astounding CAGR of over 25% and will employ a stupendous 1 crore employees making it one of the biggest value creators in India in recent times.However the telecom companies in India after enjoying a boom period in the early 2000s have faced a couple of tough years with hypercompetition leading to a price war in auction of 3G spectrum.This was followed by one of the most high profile corruption scandals in the country which resulted in the jailing of the former telecom minister in the 2nd auction of 2G spectrum.Most of the telecom companies have been found to be implicated in colluding with sleazy politicians/bureaucrats in looting the Indian taxpayers.India Real Estate Sector is one of the most corrupt in the country and after the 2G Scam,the telecom sector is giving it close competition for the No.1 spot in corruption

Despite these problems,India is set to see another spurt of growth as 3G in India has the potential to bring Internet to India’s massively under penetrated population which has phones but not computers.

Reliance Acquisitions in the Recent Past due to Detente

The detente between the Ambani brothers which lead to the rescinding of the non-compete agreement has resulted in Reliance Industries  Ltd (RIL) being the biggest Winner in the win-win arrangement.While on one hand Anil Ambani’s Reliance Communication which was facing a liquidity problem has benefited by being free to sell a stake in the company,Mukesh Ambani’s RIL has gained even more. RIL has been a huge cash cow generating billions of dollars in free cash flow from its Energy businesses each year.However RIL was finding it itself hamstrung by the non-compete agreement which prevented the company from entering the areas in which ADAG ( Anil Dhirubhai Group ) operated in. RIL tried its hand at overseas acquisitions but was not finding much success.However with the Ambani Brothers burying the hatchet,Reliance find its hands free to enter the virgin territories of Telecom,Power and Financial Services which will be high growth areas in India’s booming economy

Reliance has firmed up its intentions in all Three Areas through acquisitions,JVs and greenfield expansion.

RIL’s 4G broadband to offer exclusive content & spectacular speed at dirt-cheap rates

RIL has also grabbed the lead in content. This week’s deal gives RIL preferential access to all of Network18′s TV, Internet and digital content, across languages and genres. RIL is also talking to other media and entertainment companies, including Walt Disney’s Indian venture UTV Software, for more gaming and entertainment content, say industry executives in the know. In November, it acquired 38.5% in Extramarks Education, a company focused on school education and digital learning, for an undisclosed amount.

And lastly, there’s the RIL philosophy of disruptive pricing. According to RIL executives aware of the development, the company is looking to bundle data services at about 10 per GB, which is one-tenth of current 3G prices. It is, they say, also planning to bundle this with entry-level tablets powered by Google’s Android operating system that would cost 3,000-8,000. That the demand for low-cost tablets is robust is evident from the 1.4 million bookings that Aakash, the 2,500 tablet made by UK-based Datawind and subsidised by the government of India, received in 14 days after it was put up for sale online. The RIL official quoted in the first instance says the company is also looking to offer online services in “security, health and education”. So, for example, by paying, say, 30 a month, a customer can access doctors online 24X7. He said the company was also talking to the government to link up with the database of unique IDs being created for every Indian, called Aadhaar.

Telecommunication Operators in India caught Swindling the Government again in 3G Fraud even as 2G Scam simmers

4 Jan, 2012
Telecommunications

Telecom Companies in India are in general an unscrupulous lot with the 2G Scam showing the whole telecom industry of India in a Bad Light.While a number of top executives of telecom companies spent time in jail,it seems that these companies have learned nothing.They continue to find loopholes to take both their customers and government for a ride.Indian Broadband and Telecom companies have made defrauding customers an art by illegally adding value added services and charging for them.They also burn millions of dollars in subsidized diesel to power their telecom towers since there is no restriction on that.Now these companies have been caught again in another manipulation trick in 3G services.

Indian Telecom Companies appropriating $500 million of Fuel Subsidies for Poor and generating > 5 million tons of Carbon through Massive Diesel Burning in Telecom Towers

Indian Telecom Companies are using more than $500 million in fuel subsidies meant for the poor and generating more than 5 million tons of carbon dioxide every year by using diesel gensets at telecom towers not connected to the grid.Note the Telecom Industry in India has not exactly covered itself with glory on other matters with the 2G Telecom Scam already putting top executives in jail and implicating top telecom companies as well.The issues of massive fuel wastage in telecom towers has been raised in the past in greenworldinvestor as telecom tower companies viom,gtl,airtel and others have tried to put lipstick on the pig by making a mockery of green initiatives by committing to convert only a miniscule number of total towers to renewable energy.

India’s Broadband,Telecom Companies – Bad Customer Care,Overbilling,Overcharging built into DNA as they Loot Millions of Dollars From the Very Poorest

It is a common practice amongst these companies to add value added services like caller tunes without the customer’s permission which is totally illegal.Since most of the customers do not know how the billing is happening and do not know how to turn it off,these companies make millions of dollars in illegal profits from such customers.Airtel,Reliance and other major telecom companies in India follow this practice widely and openly.Nobody is going to complain about 50c/month being charged wrongly by the telecom provider.However 50c multiplied by a 100 million customers is neat $50 million in profits for these companies.This overbilling of customers even extends to broadband customers as I recently found out .After a nightmarish experience with Tata Indicom whose pathetic customer service forced me to change to Airtel,I found a blatant case of overcharging of money in my very first bill.

The company Airtel had neatly added a Rs 100 extra charge for using a anti-virus software called “airtel pc secure” when i distinctly remember never asking for the software.The engineer who installed it and the salesperson who sold it never mentioned the fact and I never asked for it as I use a very good free anti-software and never in my dreams use a software from a telecom provider (why not go for Norton ). The customer care service is so bad at airtel that the number mentioned on the bill “121? for complaints does not work.The call centre operator says that the number works for prepaid customers even when the broadband bill mentions the number.Other numbers don’t work so I am forced to email the appleate authority (god knows what that means).After 2 days of not recieving a reply,when a mail says you should get a reply in 24 hours,airtel responds by saying they are removing the charge on my bill as a “Goodwill gesture”.The gall of the company is quite amazing,after having clearly committed a mistake (which I think is very widespread and not a mistake at all) the company acts descending on the customer.

Note most of these companies had to pay through their mouth in the 3G auction services.A number of them had failed to get 3G spectrum in most popular circles as the competition remains high in the Indian telecom sector with about 10 or more operators compared to 3-4 in most others.So what these companies have done is to offer 3G services to customer using roaming services.Note Roaming Services allow companies to give their customers communication options in regions where the companies don’t have their own services.It does not allow companies to offer services to new customers where they don’t have spectrum.These companies have made 3G Roaming a Farce by doing the same thing.Now the government is acting against this powerful telecom cartel,these companies are crying hoarse.

Read about Mobile Phone Companies in India

3G roaming: BSNL accuses telcos of illegally adding subscribers

In more trouble for private telecom players, BSNL today accused them of acquiring 3G subscribers by entering into “illegal” inter-circle roaming agreements in circles without having designated spectrum.
In an application filed before TDSAT, state-run BSNL has alleged that operators Bharti, Vodafone, Idea, Tatas and Aircel are providing 3G services by “misrepresenting” the public on the “strength of illegal arrangements /agreements” entered by them. “In some telecom service areas, without paying for 3G spectrum or investing a single penny in setting up telecom infrastructure, network etc are illegally acquiring and continue to acquire subscriber by misrepresenting that they can provide 3G services,” said BSNL in its application filed today.

Mobile Phone Companies in India List – MarketShare Churn by Local Indian Players Entry

5 Jul, 2011
Technology,Telecommunications

TheMobile Phone Indian telecom industry is the world’s fastest growing industry with 792 million mobile phone subscribers as of February 2011. It is also the second largest telecommunication network in the world in terms of number of wireless connections after China. The industry will reach around $80 billion in revenues by next year showing an astounding CAGR of over 25% and will employ a stupendous 1 crore employees making it one of the biggest value creators in India in recent times. The introduction of mobile phones brought a major revolution in the industry. Mobile phones have become a modern day necessity. Be it a professional, a trader, a housewife or a student, everyone has one. The availability of cheap mobiles in the Indian market, is also a major factor in making it available & affordable to the common masses. Today’s mobile phone is not just a phone, it has a built in camera, music system, games & internet enabled networking. These facilities entertain you as well as make you available to work as & when required.

The leading mobile phone companies in India are:

Nokia – Nokia has played a pioneering role in the growth of cellular technology in India. Nokia started its India operations in 1995, and presently operates out of offices in New Delhi, Mumbai, Kolkata,Jaipur,Lucknow,Chennai, Bangalore, Pune and Ahmedabad. Today, India holds the distinction of being the second largest market for the company globally.Nokia has established itself as the market and brand leader in the mobile devices market in India. The company has built a diverse product portfolio to meet the needs of different consumer segments.products that cater to first time subscribers to advanced business devices and high performance multimedia devices for imaging, music and gaming.Nokia has one of the largest distribution network with presence across 1,30,000 outlets.With the global launch of Ovi, the company’s Internet services brand name, Nokia is renewing itself to be at the forefront of the convergence of internet and mobility.

Sony Ericsson – is a joint venture between Sony & Ericsson. The Sony Group is primarily focused on the Electronics, Game (PlayStation), Entertainment (such as motion pictures and music), and Financial Services sectors. Ericsson provides mobile and fixed networks, multimedia solutions and telecom services which make a real difference to people’s lives. Sony Ericsson phones are known for their stunning hardware and performance. Their Xperia phones have Android features, which gives access to the best applications and services around. It enables launching apps in an instant, viewing messages, mails and more. Sony phones are known for their good camera & sound system. Not only this the camera is excellent & provides great stills & videos.

LG - LG brand is one of the most well-known in the world for different electronic products. LG mobiles offer range of CDMA handsets, GSM handsets, 3G handsets, and cellular phones. LG mobiles are economical and affordable which makes it most approachable brand in the market for people from every class. LG mobile has different models like Viewty, Shine, Dynamite, Pulse and Bullet. These high range mobiles have advanced features and attractive enhancements. Shoot, play music, browse internet, connect with system, store data and many more.

Samsung – is a leading name in TVs, air conditioners & electrical appliances. Samsung mobile phones come in a range of dual sim, Qwerty, CDMA, smart, touch, multimedia phones & tablets. From the coolest conventional and brightest smart phones, to the most stylish touchscreens, bars, sliders and feature-rich devices with full QWERTY keyboards, Samsung has everything to offer.

Research in Motion (RIMM) – Blackberry introduced by the Canadian company Research In Motion (RIM) in 1999, it delivers information over the wireless data networks of mobile phone service companies. It supports push e-mail, mobile telephone, text messaging, internet faxing, web browsing and other wireless information services. It was the first phone which laid emphasis on e-mail service onmobile  phones. RIM announced 8 million BlackBerry subscribers in 2007. Most BlackBerry devices come with a QWERTY keyboard. Generally providers offer flat monthly pricing for unlimited data between BlackBerry units. In today’s busy life, credit can be given to Blackberry, which has enabled socializing a lot, be it setting up movie dates with friends or with business associates to attend meetings. It comes in a wide range of GSM, CDMA & GPRS enabled phones with features like camera, speakerphone, Bluetooth, MicroSD, polyphonic ringtones, media player, Wi-Fi etc. Motorola creates numerous products for use by the government, public safety officials, business installments, and the general public. These products include cell phones, laptops, computer processors, and radio communication devices.

Apple – Apple the biggest company in the world by value which has  changed the entire technology sector more than any company in history though launch of iconic  products like iPhone,iPod and iPad does not have a strong presence in India.This is due to Apple’s premium pricing which means that the vast number of Indians simply can’t afford Apple products.However in recent times Apple has been reducing its prices of older products.Most of Apple’s smartphones in India are brought from outside rather than being sold here.

HTC – HTC the Taiwanese smartphone company which has seen the fastest growth after Apple has small presence in India like Apple.Its distribution structure is not that strong and it does not have the product lineup to cater to the low and middle segments which are dominated by Samsung and Nokia

Motorola-Google -This American-based, multinational, telecommunications company, Motorola’s wireless telephone handset division was a pioneer in cellular phones. It pioneered the flip phone with the StarTAC in the mid-1990s, and had a rebirth with the RAZR in the mid-2000s before losing significant market share. Lately it has focused on smartphones using Google’s open-source Android mobile operating system. The first phone to use the newest version of Android 2.0, was released in 2009 as the Motorola Droid. The handset division has since then been spun off into the independent Motorola Mobility.With Google buying Motorola now,expect the best Android phones to come out of this company.

Spice -  Now a subsidiary of Idea Cellular Ltd.which owns more than 80% equity in the company. The Aditya Birla Group took over the ownership of Spice Telecom for over Rs 2,700 crore. The prepaid users(which form majority in India) had problems getting their phones recharged with prepaid balance when in roaming. Hence, Spice could not regain the market share inspite of its low tariffs. Spice provides dual sim, GSM, CDMA, internet enabled phones. It allows cell phone users to publish, convert, and share all kinds of user generated content.

Karbonn – The company is presented by two Indian telecom majors – UTL and Jaina.The UTL Group is a multi division telecom group with an annual turnover of Rs 1600 crore. It is a leading Indian telecom powerhouse with interests that span across manufacturing, services and distribution.The Jaina Group is a reputed distribution house with interests in telecom and consumer durables. The company has represented, prominent brands such as Nokia, Samsung, Siemens, Panasonic and Philips (LCD devices) as regional or national distribution partners & are currently the national distribution partners of HTC and Motorola. The mobile phones come in the range of CDMA, touch screen, dual sim with features like long battery life & FM Radio,quality, technology, service and more, it is the perfect harmony of style and function.

Micromax – Since their entry into the Indian mobile handset market in March 2008, the overall market share increased from 0.59% for the quarter ended September 30, 2008 to 6.24% for the quarter ended March 31, 2010. The handset sales have grown by 123.48% from 1.15 million units in the quarter ended June 30, 2009 to 2.57 million units in the quarter ended March 31, 2010. It also offers CDMA, touch phones, besides the normal range of phones. Its marathon battery phone gives an extended battery life to the phone. It also has Qwerty features in its Bling phone.

Summary

The Indian Mobile Phone Industry has seen a massive churn with the success of domestic companies like Micromax,Spice and others which in the short span of time have won huge marketshare .Nokia which used to be the one time undisputed king of the market with more than 60% marketshare has now come down to less than 30%.With its fortunes being destoyed on the top end of the market by Apple and Google’s Androids,the bottom has been taken out by the nimble,street smart cheap Indian players.India is going to see how growth in mobile broadband as broadband companies in India have failed to provide Internet to most Indians.With Internet set to be consumed mostly over Mobile Phones,expect the vibrancy of the sector to continue in the future

You can read more about Nokia’s travails in the Indian mobile phone market here

  1. http://www.greenworldinvestor.com/2010/11/15/nokia-feels-the-heat-from-ultra-low-cost-chinese-white-box-mobile-manufacturers/
  2. http://www.greenworldinvestor.com/2010/10/13/could-local-indian-mobile-davids-micromaxspice-beat-global-goliaths-nokiasamsung-with-low-cost-100-android-smartphones/
  3. http://www.greenworldinvestor.com/2010/05/01/nokia-tries-to-fight-back-against-local-indian-competitors/

Bharti Airtel – Corruption made into an Art Form,Why Investors Should Avoid the Stock

25 Jun, 2011
Telecommunications

Bharti Airtel is India’s largest telecom company and is one of the world’s biggest as well.Despite hypercompetition in the Indian Telecom Industry,Airtel has managed to run quite well and avoided the deep problems of its rival like Reliance Infocomm.While others companies and newcomers like Uninor are bleeding from low ARPUs,low margins,high losses ,high debt,Airtel has managed to expand through a multi billion dollar acquisition in Africa.This has made the Airtel stock an outperformer in recent times as analysts have gone ga ga over the stock citing its competitive strengths,outsourcing model and diversification into broadband and Direct to Home (DTH) services.

However analysts as they are wont are creatures of habit and don’t go out of their comfort zone.They try to stay in the territory of the obvious and don’t look at deeper problems.India has been rocked by a number of corruption scandals and telecom has been one of the biggest hit.Unitech Wireless one of the new operators is one the verge of having its properties attached by the Indian state while top executives on Reliance (ADAG) are in jail for colluding to defraud the Indian government of billions along with the former telecom minister Raja.While Airtel is not facing this problems,its insidious business practises are equally problematic if the come to light.In broadband companies in India,I wrote how service providers fleece and loot consumer through systematically fraudulent tactics.This is so widespread that I have no doubt that top management is aware if not actively promoting such activities.A refresher,telecom providers in India routinely activate value added services like ringtones (costing Rs 30/month) and other such services without the consumer’s consent.As the amount is small and most of the consumers are illiterate without having the knowledge of what’s happening ,these companies make a killing.Airtel is also doing  this and making the biggest killing of the India consumer.Only a serious investigation on the lines of 2G telecom scam can uncover this corruption scam which goes on bringing hundreds of millions of illegal for these telecom companies.

It is a common practice amongst these companies to add value added services like caller tunes without the customer’s permission which is totally illegal.Since most of the customers do not know how the billing is happening and do not know how to turn it off,these companies make millions of dollars in illegal profits from such customers.Airtel,Reliance and other major telecom companies in India follow this practice widely and openly.Nobody is going to complain about 50c/month being charged wrongly by the telecom provider.However 50c multiplied by a 100 million customers is neat $50 million in profits for these companies.This overbilling of customers even extends to broadband customers as I recently found out .After a nightmarish experience with Tata Indicom whose pathetic customer service forced me to change to Airtel,I found a blatant case of overcharging of money in my very first bill.

Analysts will keep ignoring this until it blows up in their faces just like it has did for a number of other Indian companies like Satyam.Note even India’s biggest company like Reliance is in the dock by Indian government auditor for gold plating its gas production.With the Indian public mood strongly against every type of corruption as was seen during the Jan Lokpal agitation,its time to stay away from companies with even a tinge of corruption.

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