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Spectrum cannot come cheap, it is super-scarce resource

Written By komp limpulima on Minggu, 01 Februari 2015 | 23.25

R Jagannathan
Firstpost.com

The Union cabinet's decision to keep the� reserve price for 3G spectrum at Rs 3,705 crore per Mhz �in the 2,100 Mhz band for auctions scheduled to begin on 4 March is probably the right call. One says probably because no one can predict where prices will go in an auction, or whether the reserve prices are too high or too low. The new reserve price is 35 percent higher than what the Telecom Regulatory Authority of India (Trai) had recommended - which Rs 2,720 crore per Mhz. The Telecom Commission recommended a raise, and this is what the cabinet has now approved.

Predictably, the telecom industry is miffed, with Rajan Mathews, Director-General of the Cellular Operators Association of India (COAI), saying that the Trai price was more reasonable and the higher reserve price would inevitably lead to higher tariffs, reports� The Economic�Times .

A few weeks earlier, the cabinet had approved base prices of Rs 3,646 crore per Mhz of 800 Mhz spectrum, Rs 3,980 crore for 900 Mhz, and Rs 2,191 crore for one Mhz of all-India spectrum in the 1,800 Mhz band. Competition is expected to be keen as spectrum licences for Bharti Airtel are expiring in six circles, for Idea in nine, and for Vodafone and Reliance Communications in seven circles each this year. All of them would want to retain their hold on the versatile 900 Mhz band as far as possible. New players in broadband, like Reliance Industries, could also seek extra spectrum for various voice and data services, or to grab prime bands like 800 Mhz and 900 Mhz from the incumbents. The available spectrum in the 2,100 Mhz band is small - 5 Mhz, with 15 Mhz more promised when defence releases them – which could make bidding in this band sharper.

It is possible that the higher reserve/base prices have been prompted by non-tax revenue considerations, given the stiff fiscal deficit target of 4.1 percent this year. But even if this were the case, it would merely be a right decision taken for the wrong reason. Of the Rs 80,000-1,00,000 crore expected from a successful auction, Rs 25,000 crore could come in this financial year itself. Arun Jaitley will be happy to get this money in the till when tax revenues are sluggish.

However, it is time India's telecom industry accepted the reality that spectrum is a super-scarce resource and that it cannot ever come cheap. Their business models and profitability cannot be built on the presumption that underpriced spectrum will be offered in plenty when the resource is actually going to get scarcer in the coming years, given our voracious appetite for broadband services. India has barely scratched the surface of broadband demand, and usage is going to head for the stratosphere with plans for a Digital India being a key driver.

Here are three reasons why spectrum will always be costly in India and why telcos had better understand the reality.

First, Indian has 1.25 billion potential telecom users crammed into a very small geographical area. The US has three times the geographical area and one-fourth the population of India. This automatically means spectrum must be used super efficiently in India. High prices will pressure telcos to avoid spectrum hoarding and use better technology to pump more data through the same available spectrum.

Second, India, as a late starter in mass telephony, is over-dependent on wireless services as opposed to fixed-line telephony. While the decline in the wirelines is a worldwide phenomenon, India has had a very poor legacy of landlines. Hence our dependence on wireless telephony is very high – and growing in leaps and bounds. Of the nearly one billion telephone connections in India, barely three percent will be wireline.

The worldwide the proportion of wireline to wireless telephony is falling dramatically, thanks to the proliferation of mobiles and hand-held devices, the pressure of spectrum will always increase, and more so in India which never expanded much into fixed telephony.

Third, the spectrum prices cleared by cabinet are for the next 20 years. Assuming that the number of uses for spectrum will only rise exponentially as the country gets richer, with data trumping voice usage, the higher tariffs from pricey spectrum can easily be absorbed by the higher spectrum usage in data – especially in the second half of the licence years. In fact, voice will probably become nearly free in due course as data traffic trumps voice in the coming decade.

The only valid reason for keeping spectrum prices steady is that usage is time-sensitive: unlike coal, which can be mined this year or five years later depending on prices and demand, spectrum not used this year is spectrum wasted. However, this makes out a case for flexible pricing and spectrum leasing, not lower reserve prices overall.

What the government can, and should do, is allow spectrum leasing, spectrum mortgage and easy sale of spectrum between parties, apart from allowing easier mergers between viable and unviable telcos.

But, as I have argued before, there is� no real case of going cheap on spectrum pricing .

The writer is editor-in-chief, digital and publishing, Network18 Group


23.25 | 0 komentar | Read More

Prabhu pitches for greater investments in Railways

Suresh Prabhu said that Railways' financial health is not good and there is an urgent need of increased investments in the areas of modernisation, safety and security of passengers. "We have decided to increase investment in Railways... We have also decided to connect with various states for this (investment).

Railway Minister Suresh Prabhu pitched for greater investments in railways and said development in the sector will help the country grow. The minister was here to flag off two new trains - Ahmedabad-Chennai bi-weekly express and Ahmedabad-Darbhanga Jansadharan express. He also launched Wi-fi facility at the city railway station.

"It is a matter of pleasure for the country that our economy is on the path of improvement and progress. With this, responsibility of Railways has also increased. We need to work on many levels," said Prabhu.

He said that Railways' financial health is not good and there is an urgent need of increased investments in the areas of modernisation, safety and security of passengers. "We have decided to increase investment in Railways... We have also decided to connect with various states for this (investment).

Railways will fulfil the needs for Gujarat's development as well. I will discuss with the Chief Minister on how to work on larger scale for improvement," he said. Prabhu later met with Chief Minister Anandiben Patel.

The minister also claimed that Railways was priority of the Prime Minister Narendra Modi-led government and the sector can contribute to his mantra of 'Sabka Sath, Sabka Vikas' (participation of all for development of all).

"Development of Railways is on the priority list of our Prime Minister. If railways develop, economy will also be strengthened... and GDP (of the country) will also rise by 2-3 per cent. Though our GDP is growing today, with much efficient railways system it will grow rapidly," he said. The minister said further development in the sector will also create jobs for youths.

Prabhu appealed to people to join Modi's flagship 'Swachh Bharat Abhiyan' and said the mission is associated with country's identity.


23.25 | 0 komentar | Read More

Checkout Bengal Global Business Summit 2015

'Come to Bengal ride the growth' under this slogan took place the biggest event in West Bengal that is the Bengal Global Business Summit. The two day summit got off to a positive start with West Bengal Chief Minister Mamta Banerjee encouraging the need for investment climate in the state.

'Come to Bengal ride the growth' under this slogan took place the biggest event in West Bengal that is the Bengal Global Business Summit. The two day summit got off to a positive start with West Bengal Chief Minister Mamta Banerjee encouraging the need for investment climate in the state.  

Watch videos for more…


23.25 | 0 komentar | Read More

Sun-Ranbaxy's $4bn merger deal gets USFTC's conditional nod

Approval subject to divestment of one antibiotic product to avoid anticompetitive impact in the US mkt

The US Federal Trade Commission has approved Sun Pharmaceutical 's plan to buy  Ranbaxy on the condition that it divests one antibiotic product - generic minocycline tablets - to avoid anti-competitive impact in the US market. Torrent Pharma  will acquire Ranbaxy's minocycline business in the US.

Generic minocycline tablets are used to treat a wide array of bacterial infections, including pneumonia, acne, and urinary tract infections.

According to the FTC's complaint, the proposed merger would likely harm future competition by reducing the number of suppliers in the US markets for three dosage strengths (50 mg, 75 mg, and 100 mg) of generic minocycline tablets.

Ranbaxy is currently one of three suppliers of the products, while Sun is one of only a limited number of firms likely to sell generic minocycline tablets in the United States in the near future. Sun's entry likely would have resulted in significantly lower prices for these drugs.

Sun-Ranbaxy is currently also in the process of divesting seven brands in India as per the CCI order.

The Sun-Ranbaxy merger now needs approval from just the Punjab and Haryana High Court. The court will be hearing on the merger on February 2.

Sun Pharma had agreed to buy Ranbaxy from Japan's Daiichi Sankyo in April.

Sun Pharma stock price

On January 30, 2015, Sun Pharmaceutical Industries closed at Rs 915.95, down Rs 3.25, or 0.35 percent. The 52-week high of the share was Rs 939.05 and the 52-week low was Rs 552.50.


The latest book value of the company is Rs 35.77 per share. At current value, the price-to-book value of the company was 25.61.


23.25 | 0 komentar | Read More

See further softening in interest rates: Chanda Kochhar

From the sidelines of the World Economic Forum at Davos, Chanda Kochhar, MD & CEO of ICICI Bank , says India is at a point where most of the macroeconomic indicators are positive and it is time to capitalise on all the potential that the country has.

When asked on her view whether the Modi government would deliver on its promises, she was optimistic that Narendra Modi would deliver.

On the interest rate front, she expects further softening, which would be good for the whole economy.

Below is the transcript of Chanda Kochhar's interview with by Susan Li & Geoff Cutmore

Li: We spoke earlier with the State Bank of India chairwoman and she said because of this unleashing, more easing and business stimulus from the ECB - is good for India, your thoughts?

A: Of course it is. The more the liquidity in the market, I think that is good for India but what is of course required for India is to maintain its investment climate so that it continues to remain a great investment destination.

Cutmore: Is Narendra Modi going to deliver? That is the question I keep hearing here, a lot of people are very optimistic about India and there does seem to be a rerating going on here but at some point we are going to have to see some real concrete evidence of reforms?

A: Definitely I think he is going to deliver and I think that direction is correct - everything all the policies that he has articulated are growth friendly, they are business friendly. And also it is not that no action has taken place, a lot of small action has taken place, a lot of opening up of the foreign direct investment (FDI) in various sectors has taken place. So I think a lot of the decisions have already been announced but yes, the impact of all those on the real economy always takes a little bit of time.

Li: So you have two months to go until he finishes off his first year in office but I would say there has been a bit of a flip-flopping from Modi because when he was the head of Bhartiya Janata Party (BJP) and there was another administration in office, he was against introducing goods and services tax (GST) but now he said okay we are going to introduce the GST in India.

A: I think GST is very good for the economy. If it gets implemented, it can add almost one percent to the GDP. GST rationalises taxes. So overall it brings about efficiency in taxes and that is how it adds to the gross domestic product (GDP). So I think it is good for the entire economy as a whole.

Cutmore: Modi has got a wonderful opportunity here because India as a buyer of energy is going to see tremendous benefits from this declining oil price. So if not now then it will be a missed opportunity.

A: Yes, I think in that sense everything is working well for India because we have never seen oil prices being what they are and it has a huge positive impact on India but if you look at it even from the various macroeconomic indicators point of view, India is very well placed. So you are right, this is the time for us to capitalise on the potential we have but we are on the right track.

Li: What about rate cuts because we have got that just as a surprise move from Governor Rajan and some say this is just only beginning because we might be in this deflationary spiral because of the weaker oil price?

A: But in India I don't think it was a surprise move. People were waiting for the rate cut, it was quite anticipated and in fact the 25 bps cut that has happened, it is just the beginning. We should see some more softening of interest rates taking place and I think that is going to be good for the economy.

Cutmore: What does it mean for your business specifically because I know the analysts that have looked at have talked about net interest lending margins could be bigger, could be a bit fatter but will that be easy in a market place where interest rates are coming down?

A: No, I think we should expect that net interest margins would be maintained because gradually cost of funds would come down and the banks would pass that on to the consumer so it should neither expand nor shrink.


23.25 | 0 komentar | Read More

Report card: 10 things that made or baked your money in January

SLIDESHOW

Sat, Jan 31, 2015 at 17:15

| Source: Moneycontrol.com

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.


23.25 | 0 komentar | Read More

Spectrum cannot come cheap, it is super-scarce resource

Written By komp limpulima on Sabtu, 31 Januari 2015 | 23.26

R Jagannathan
Firstpost.com

The Union cabinet's decision to keep the� reserve price for 3G spectrum at Rs 3,705 crore per Mhz �in the 2,100 Mhz band for auctions scheduled to begin on 4 March is probably the right call. One says probably because no one can predict where prices will go in an auction, or whether the reserve prices are too high or too low. The new reserve price is 35 percent higher than what the Telecom Regulatory Authority of India (Trai) had recommended - which Rs 2,720 crore per Mhz. The Telecom Commission recommended a raise, and this is what the cabinet has now approved.

Predictably, the telecom industry is miffed, with Rajan Mathews, Director-General of the Cellular Operators Association of India (COAI), saying that the Trai price was more reasonable and the higher reserve price would inevitably lead to higher tariffs, reports� The Economic�Times .

A few weeks earlier, the cabinet had approved base prices of Rs 3,646 crore per Mhz of 800 Mhz spectrum, Rs 3,980 crore for 900 Mhz, and Rs 2,191 crore for one Mhz of all-India spectrum in the 1,800 Mhz band. Competition is expected to be keen as spectrum licences for Bharti Airtel are expiring in six circles, for Idea in nine, and for Vodafone and Reliance Communications in seven circles each this year. All of them would want to retain their hold on the versatile 900 Mhz band as far as possible. New players in broadband, like Reliance Industries, could also seek extra spectrum for various voice and data services, or to grab prime bands like 800 Mhz and 900 Mhz from the incumbents. The available spectrum in the 2,100 Mhz band is small - 5 Mhz, with 15 Mhz more promised when defence releases them – which could make bidding in this band sharper.

It is possible that the higher reserve/base prices have been prompted by non-tax revenue considerations, given the stiff fiscal deficit target of 4.1 percent this year. But even if this were the case, it would merely be a right decision taken for the wrong reason. Of the Rs 80,000-1,00,000 crore expected from a successful auction, Rs 25,000 crore could come in this financial year itself. Arun Jaitley will be happy to get this money in the till when tax revenues are sluggish.

However, it is time India's telecom industry accepted the reality that spectrum is a super-scarce resource and that it cannot ever come cheap. Their business models and profitability cannot be built on the presumption that underpriced spectrum will be offered in plenty when the resource is actually going to get scarcer in the coming years, given our voracious appetite for broadband services. India has barely scratched the surface of broadband demand, and usage is going to head for the stratosphere with plans for a Digital India being a key driver.

Here are three reasons why spectrum will always be costly in India and why telcos had better understand the reality.

First, Indian has 1.25 billion potential telecom users crammed into a very small geographical area. The US has three times the geographical area and one-fourth the population of India. This automatically means spectrum must be used super efficiently in India. High prices will pressure telcos to avoid spectrum hoarding and use better technology to pump more data through the same available spectrum.

Second, India, as a late starter in mass telephony, is over-dependent on wireless services as opposed to fixed-line telephony. While the decline in the wirelines is a worldwide phenomenon, India has had a very poor legacy of landlines. Hence our dependence on wireless telephony is very high – and growing in leaps and bounds. Of the nearly one billion telephone connections in India, barely three percent will be wireline.

The worldwide the proportion of wireline to wireless telephony is falling dramatically, thanks to the proliferation of mobiles and hand-held devices, the pressure of spectrum will always increase, and more so in India which never expanded much into fixed telephony.

Third, the spectrum prices cleared by cabinet are for the next 20 years. Assuming that the number of uses for spectrum will only rise exponentially as the country gets richer, with data trumping voice usage, the higher tariffs from pricey spectrum can easily be absorbed by the higher spectrum usage in data – especially in the second half of the licence years. In fact, voice will probably become nearly free in due course as data traffic trumps voice in the coming decade.

The only valid reason for keeping spectrum prices steady is that usage is time-sensitive: unlike coal, which can be mined this year or five years later depending on prices and demand, spectrum not used this year is spectrum wasted. However, this makes out a case for flexible pricing and spectrum leasing, not lower reserve prices overall.

What the government can, and should do, is allow spectrum leasing, spectrum mortgage and easy sale of spectrum between parties, apart from allowing easier mergers between viable and unviable telcos.

But, as I have argued before, there is� no real case of going cheap on spectrum pricing .

The writer is editor-in-chief, digital and publishing, Network18 Group


23.26 | 0 komentar | Read More

Sun-Ranbaxy's $4bn merger deal gets USFTC's conditional nod

Approval subject to divestment of one antibiotic product to avoid anticompetitive impact in the US mkt

The US Federal Trade Commission has approved Sun Pharmaceutical 's plan to buy  Ranbaxy on the condition that it divests one antibiotic product - generic minocycline tablets - to avoid anti-competitive impact in the US market. Torrent Pharma  will acquire Ranbaxy's minocycline business in the US.

Generic minocycline tablets are used to treat a wide array of bacterial infections, including pneumonia, acne, and urinary tract infections.

According to the FTC's complaint, the proposed merger would likely harm future competition by reducing the number of suppliers in the US markets for three dosage strengths (50 mg, 75 mg, and 100 mg) of generic minocycline tablets.

Ranbaxy is currently one of three suppliers of the products, while Sun is one of only a limited number of firms likely to sell generic minocycline tablets in the United States in the near future. Sun's entry likely would have resulted in significantly lower prices for these drugs.

Sun-Ranbaxy is currently also in the process of divesting seven brands in India as per the CCI order.

The Sun-Ranbaxy merger now needs approval from just the Punjab and Haryana High Court. The court will be hearing on the merger on February 2.

Sun Pharma had agreed to buy Ranbaxy from Japan's Daiichi Sankyo in April.

Sun Pharma stock price

On January 30, 2015, Sun Pharmaceutical Industries closed at Rs 915.95, down Rs 3.25, or 0.35 percent. The 52-week high of the share was Rs 939.05 and the 52-week low was Rs 552.50.


The latest book value of the company is Rs 35.77 per share. At current value, the price-to-book value of the company was 25.61.


23.26 | 0 komentar | Read More

Checkout Bengal Global Business Summit 2015

'Come to Bengal ride the growth' under this slogan took place the biggest event in West Bengal that is the Bengal Global Business Summit. The two day summit got off to a positive start with West Bengal Chief Minister Mamta Banerjee encouraging the need for investment climate in the state.

'Come to Bengal ride the growth' under this slogan took place the biggest event in West Bengal that is the Bengal Global Business Summit. The two day summit got off to a positive start with West Bengal Chief Minister Mamta Banerjee encouraging the need for investment climate in the state.  

Watch videos for more…


23.26 | 0 komentar | Read More

See further softening in interest rates: Chanda Kochhar

From the sidelines of the World Economic Forum at Davos, Chanda Kochhar, MD & CEO of ICICI Bank , says India is at a point where most of the macroeconomic indicators are positive and it is time to capitalise on all the potential that the country has.

When asked on her view whether the Modi government would deliver on its promises, she was optimistic that Narendra Modi would deliver.

On the interest rate front, she expects further softening, which would be good for the whole economy.

Below is the transcript of Chanda Kochhar's interview with by Susan Li & Geoff Cutmore

Li: We spoke earlier with the State Bank of India chairwoman and she said because of this unleashing, more easing and business stimulus from the ECB - is good for India, your thoughts?

A: Of course it is. The more the liquidity in the market, I think that is good for India but what is of course required for India is to maintain its investment climate so that it continues to remain a great investment destination.

Cutmore: Is Narendra Modi going to deliver? That is the question I keep hearing here, a lot of people are very optimistic about India and there does seem to be a rerating going on here but at some point we are going to have to see some real concrete evidence of reforms?

A: Definitely I think he is going to deliver and I think that direction is correct - everything all the policies that he has articulated are growth friendly, they are business friendly. And also it is not that no action has taken place, a lot of small action has taken place, a lot of opening up of the foreign direct investment (FDI) in various sectors has taken place. So I think a lot of the decisions have already been announced but yes, the impact of all those on the real economy always takes a little bit of time.

Li: So you have two months to go until he finishes off his first year in office but I would say there has been a bit of a flip-flopping from Modi because when he was the head of Bhartiya Janata Party (BJP) and there was another administration in office, he was against introducing goods and services tax (GST) but now he said okay we are going to introduce the GST in India.

A: I think GST is very good for the economy. If it gets implemented, it can add almost one percent to the GDP. GST rationalises taxes. So overall it brings about efficiency in taxes and that is how it adds to the gross domestic product (GDP). So I think it is good for the entire economy as a whole.

Cutmore: Modi has got a wonderful opportunity here because India as a buyer of energy is going to see tremendous benefits from this declining oil price. So if not now then it will be a missed opportunity.

A: Yes, I think in that sense everything is working well for India because we have never seen oil prices being what they are and it has a huge positive impact on India but if you look at it even from the various macroeconomic indicators point of view, India is very well placed. So you are right, this is the time for us to capitalise on the potential we have but we are on the right track.

Li: What about rate cuts because we have got that just as a surprise move from Governor Rajan and some say this is just only beginning because we might be in this deflationary spiral because of the weaker oil price?

A: But in India I don't think it was a surprise move. People were waiting for the rate cut, it was quite anticipated and in fact the 25 bps cut that has happened, it is just the beginning. We should see some more softening of interest rates taking place and I think that is going to be good for the economy.

Cutmore: What does it mean for your business specifically because I know the analysts that have looked at have talked about net interest lending margins could be bigger, could be a bit fatter but will that be easy in a market place where interest rates are coming down?

A: No, I think we should expect that net interest margins would be maintained because gradually cost of funds would come down and the banks would pass that on to the consumer so it should neither expand nor shrink.


23.26 | 0 komentar | Read More
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