Govt loath to ring in Net telephony
Spice plans Rs 25cr network expansion
New models to power Bajaj in catch-up race
Bharat Petro alone in Allahabad refinery
Sun Pharma to offer loan surety for US subsidiary

 
 
GOVT LOATH TO RING IN NET TELEPHONY 
 
 
FROM M RAJENDRAN
 
New Delhi, Jan. 21: 
First it was satellite television which saw many a regulator and lawmaker spend sleepless nights. Then came the internet, throwing up challenges to existing rules faster than they could adapt. It changed the rules of the game, as internet telephony is poised to do now.

Sushma Swaraj realised that the march of technology is virtually inevitable when, in her previous stint as the communications minister, she attempted to obstruct pornographic phone lines and internet sites. The experience with DTH was no different.

But the lessons are yet to be learnt, if the progress, or rather the lack of it on introducing voice over internet protocol (VoIP) is any indication. Nor has Cisco chief John Chambers’ wakeup call done much to shake the government out of its stupor.

VoIP, latest cannonball that threatens to barge through the ostrich’s fortress, irrespective of how welcome it is, was considered only a couple of years ago to be more of a hype and to offer a quality of voice as bad or as good as ham radio.

Today its presence is grudgingly acknowledged by most internet service providers worldwide, including our own Videsh Sanchar Nigam Limited (VSNL).

According to VSNL’s internal estimates, the company can lose more than Rs 100-200 crore in a month in ISD revenues if internet telephony is given the nod.

“If a subscriber uses one hour each day (peak hour) of internet telephony for a month, we could lose more than Rs 200 crore. It would be more if we take into account the subscribers using IP telephony through connections of private internet service providers,” said a vigilance officer in VSNL.

But while the ostriches ponder over the consequences of opening the gates to technology, it has already seeped in through the cracks in the wall. The internet provides a range of software like Net2Phone, essential for internet telephony.

“It is a simple process. One has to download the software and once it is in your personal computer, the setup will direct you to do the rest. Get connected to the internet and dial the concerned number,” said a cybercafe operator.

However, he also sounded a warning, “Do not speak for more than 5-10 minutes at a time, it is easy to detect and try to use new numbers to connect your ISP.”

While sceptics still doubt the voice quality and dub the fuss about IP as unnecessary hype, their tribes are fast depleting.

According to a recent report on IP telephony by iLocus .com, “The quality of VoIP calls has improved exponentially over the last couple of years. IP has proved to enable a range of convergent and value-added services at a lower cost to the carrier and with a lot of flexibility and speed.”

Contrast that with the National Telecom Policy 1999 which stated, “Internet telephony shall not be permitted at this stage. However, the government will continue to monitor the technological innovations and their impact on national development and review this issue at an appropriate time.”

The pressure on the government to legalise VoIP is immense, as in the era of convergence, internet telephony is expected to be a major revenue earner. In fact, the more the government delays opening up its gates to VoIP using the fig leaf of lost revenues for Bharat Sanchar Nigam Limited and VSNL, the more it stands to lose.

“These organisations will still lose. The government should realise that internet telephony is growing slowly but steadily and should legalise it without delay. In fact it should make it more reliable and ensure that it is affordable for all,” said N Bhaskar Rao, chairman, Media Development and Research Association.

   

 
 
SPICE PLANS RS 25CR NETWORK EXPANSION 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Jan. 21: 
Spice Telecom, the largest cell-phone provider in the city, has lined up a fresh investment of Rs 25 crore to expand its network in terms of the number of base stations and switch capacity. Recently, it invested around Rs 35 crore to increase the number of base stations from the existing 59 to 78 and switch capacity from one lakh to 1.5 lakh.

Sources said the investment had been planned to maintain parity with the company’s rising consumer base. “We have 91,000 consumers and expect to cross a lakh by the end of March,” they said.

The investment will be made over the next five months, by when the consumer base will be over 1.1 lakh. “We are expanding our capacities with the view that the mobile is increasingly becoming a very essential communication tool, not a luxury,” sources said.

They also pointed out that cellular phones have overshadowed fixed line connections, with the latter taking a backseat in several developed countries including the US.

The phenomenon is likely to be repeated here as soon as a parity is brought about in prices of the two services.

Sources however did not specify whether there was any immediate prospect for reduction in tariffs.

The company is in advanced stages of concluding deals with three applications service providers for high end messaging services. The new services will include access to stock market information even in the non-WAP handsets. The names of the service providers, however, were not divulged.

It is also launching a marketing drive with cricketer Sourav Ganguly. Select consumers, who have taken connections from January onwards will have the opportunities to welcome the Indian captain at their doorsteps.

Spice however does not see much threats from Bharat Sanchar Nigam Ltd, which will commence its cell-phone services from the last week of this month.

   

 
 
NEW MODELS TO POWER BAJAJ IN CATCH-UP RACE 
 
 
FROM OUR CORRESPONDENT
 
Pune, Jan. 21: 
Knocked off the highest perch in the two-wheeler market by Hero Honda, Bajaj Auto is lining up a bevy of new models in a strategy it says will help it reclaim lost ground.

Speaking at the launch of the Kawasaki Bajaj Eliminator, chairman-cum-managing director Rahul Bajaj said his company was passing through its ‘most difficult time in history’, but was working on ways to wrest market leadership by the end of the current financial year. “This year has been very bad. However, we can only go up. We have outstanding competitors,” he said in remarks seen as an admission that rival Hero Honda is setting the pace for a company whose name was synonymous with two-wheelers.

There were reminders, though, that performance this year will be disappointing. Bajaj said investors should expect the lowest-ever profits, and a 14 per cent decline in output at 12.3 million vehicles compared with 14.3 million units last year. Cash reserves are likely to shrink from Rs 2,500 crore to Rs 1,700 crore as a result of a generous buyback offer and a VRS package.

Talking about succession plans, Bajaj hinted that son Rajiv could succeed him as the managing director before his term ends four years from now, though he will continue to serve as chairman. “I have been appointed for a five-year term. I am yet to decide whether I should relinquish charge before my term ends.”

Bajaj said it is the core team of ‘competent professionals’, comprising his two sons Rajiv Bajaj (president) and Sanjiv Bajaj (general manager, finance) and R L Ravichandran (vice-president business & product development) which is entrusted with running the day-to-day affairs.

A slew of models, both motorcycles and scooters, are in the works. Pulsar, a sporty bike with a 175 cc engine, will hit the roads in April. It will be followed by a 100 CC KB Acer, a stylised version of the former 4S champion version. Ravichandran said 70,000 bikes will roll out of the company’s Waluj plant every month in 2001-02 compared with 40,000 this year.

New scooters are also planned. For instance, Chetak Super’s economy model, which will cost Rs 23,000 compared with Rs 28,000 for its standard version. Saffire, Spirit and Spice have already been launched in select markets.

The announcement is significant at a time when the two-wheeler market has shifted heavily towards bikes at the expense of scooters — the company’s mainstay.

Of the Rs 300 crore investments planned in the current financial year, Rs 190 crore has been pumped into a manufacturing line for Kawasaki Bajaj Eliminator, which will have a limited five-city launch. It will arrive in Calcutta in the second phase.

Meanwhile, talks with Allianz of Germany for a joint venture in general and life insurance business are in advanced stage, Bajaj said.

   

 
 
BHARAT PETRO ALONE IN ALLAHABAD REFINERY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 21: 
Bharat Petroleum Corporation Ltd (BPCL) is likely to go it alone for its proposed 7 million tonne refinery coming up at Allahabad in UP. The refinery, which is likely to be implemented from 2001, is currently pegged at Rs 6,200 crore.

Confirming this, senior company officials said work on the project will commence after it receives the necessary approvals from the government. The project is likely to be financed by a combination of debt and internal accruals. BPCL, they added, will approach the financial institutions for part-financing the project once the requisite approvals are obtained.

Sources further added that even as approvals for the Allahabad refinery are awaited, BPCL will focus its attention presently on the 6 million tonne Bina refinery promoted by Bharat Oman Refineries Ltd, a BPCL- Oman Oil Company joint venture.

Oman Oil is expected to formally communicate its decision on participation in the project including its equity stake by the end of this month.

Sources here said BPCL will take a decision on the induction of a third partner only after it received a response from Oman Oil.

“Oman Oil is scheduled to pick up a 26 per cent stake in the company. If it decides to pick up more, then a third partner is unlikely. Thus the situation is tentative at this stage and any decision is possible after the company announces its decision,” the official averred.

Apart from these two ambitious projects, BPCL is shortly set to takeover two stand-alone refineries which includes Kochi Refineries (KRL) and Numaligarh Refineries (NRL).

The total refining capacity of the company consequent to the absorption of these companies is expected to be over 17 million tonnes. Both acquisitions will be initially funded through internal generations and borrowings and the rest by an initial public offer, the tentative size of which is put at around Rs 500 crore.

Recent reports also indicate that the corporation is keen to acquire a stake in IBP Ltd, either in its own capacity or in collaboration with strategic partners. The other companies who have shown interest in IBP include IOC, Reliance Petroleum and HPCL.

Further, the company plans to exploit the potential of its retail outlets by setting up various facilities in these outlets.

   

 
 
SUN PHARMA TO OFFER LOAN SURETY FOR US SUBSIDIARY 
 
 
FROM SATISH JOHN
 
Mumbai, Jan. 21: 
Sun Pharma will guarantee Rs 46.5 crore ($ 10 million) loan for Caraco, its ailing US subsidiary, from ICICI Bank and Bank of Nova Scotia, said R K Baheti, vice president-finance and company secretary of Sun Pharma. “ICICI Bank helped us by extending a portion of their ADR proceeds,” he added.

Senior officials from Sun Pharma pointed out that, among other things, the loan will meet the working capital requirement for continuance of its operations. In the past few years, Sun has made two infusions of cash in the subsidiary by way of equity and debt, added the sources.

Sun Pharma had acquired Caraco by investing $ 7.5 million in the equity. Later, it invested another $ 5 million in the nature of a loan.

The take-over of Caraco followed part of Sun’s aggressive plans in the US generics markets. Sun is believed to have been holding around 49 per cent stake in the generic formulation producer. The equity stake is slated to go up to over 60 per cent at a later stage.

However, the venture, despite its ambitious intentions, has not yielded fruits as Caraco posted a loss of over $ 9 million on sales of over $ 2 million for the year ended December 1999.

The loss included around $ 6 million investment in research and development related to product filings. Pharmaceutical analysts have also expressed concern about the impact of this subsidiary.

“Sun Pharma is doing well with its existing focus on formulations. However, Caraco is a drag on the company,” a senior analyst averred.

Company officials, while admitting that their US subsidiary is presently a drag on their performance, however, expect the subsidiary to turnaround in the near future.

“We have filed a series of abbreviated new drug applications (ANDA) applications before the FDA in the US and we are positive about the future of this subsidiary,” they noted.

While the total market for generics is estimated at over $ 25 billion, Caraco, according to reports, has over five ANDAs submitted to the FDA in the US for approval. The company is also lining up three additional products for bio-studies and around 21 products are reported to be under active development.

Sun Pharma, which is one of the top pharmaceutical companies in the country, has targeted to achieve the leadership status in gastroenterology over the next three years.

   
 

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