BSNL told to avoid rate war
Tisco plans to hike long product capacity
T+3 stock settlement from April
MTNL roasted on bourses
Cellular gear to cost less
Economy fighting fit, says Sinha
Build-up to US-64’s real worth
Foreign Exchange, Bullion, Stock Indices

New Delhi, Dec. 19: 
The Telecom Commission has suggested that the state-owned Bharat Sanchar Nigam Ltd should refrain from sparking off a rate war by slashing STD tariffs in response to the cellular operators’ move to slash mobile-to-mobile STD rates by half and launch of Bharti’s national long distance services at a substantial discount.

The commission has suggested that BSNL should instead wait for the Telecom Regulatory Authority of India (Trai) to announce new STD tariffs in March.

The existing rates became effective from October 1, 2000, and will be valid till March. Trai is expected to lower STD rates in the third phase of tariff rebalancing.

BSNL board members also feel that the government-owned telecom major should wait for Trai’s recommendations.

They say the private operators like Bharti and Reliance, who will be launching competing STD networks, should also wait for Trai’s new tariff formula.

“There are at least five more companies who are likely to launch NLD services and it would take them three to four months to start their operations. By then, the Trai too is scheduled to complete its tariff rebalancing and come out with revised rates. BSNL should wait and watch these developments before deciding on revising the various tariff slabs including STD rates,” said a BSNL board member.

Reliance Communications, Videsh Sanchar Nigam Ltd, Powergrid Corporation of India Ltd, RailTel (an Indian Railway company), and Gas Authority of India Ltd are likely to launch the NLD services.

Bharti, which announced the launch of IndiaOne on Monday, had said that it would offer deep discounts without spelling out how high these would be. The speculation is that it could go up to as high as 50 per cent of the existing rate structure.

IndiaOne will be the first private player to offer STD services which is expected to become operational from January 26. Bharti has notified Trai of IndiaOne’s tariff structure but has yet to make it public.

Tuesday, six mobile operators announced that they would be cutting their mobile-to-mobile STD rates by 50 per cent to Rs 12 during the peak hours of 9am to 9pm for a cross-country call, and Rs 6 for a call within the region.

An Icra study on the Indian telecom industry says: “The second round of reductions in long distance call tariff was implemented with effect from October 1, 2000. The revised tariffs are in the nature of ‘price caps’ and are now applicable till March 31. The third round of tariff rebalancing, not due before April 1, would result in reductions of 0-23 per cent over the price caps in the second round of tariff rebalancing.”

According to an estimate by Trai, the long distance traffic in terms of volume is expected to grow at 25 per cent per annum during financial years 1999-2002. However, the Icra study has predicted a slower growth at 6.5 per cent per annum during the same period at Rs 13,200 crore by 2000 and Rs 15,105 crore by 2002.


Calcutta, Dec. 19: 
Tata Iron & Steel Company (Tisco), the country’s largest private sector steel maker, is considering a move to increase its long-product capacity by 1 million tonnes.

The new unit, expected to come up near Tisco’s existing plant in Jamshedpur, will need an investment of around Rs 1,000 crore. The move is aimed at bringing a proper balance in the company’s product mix, now dominated by flat products.

Sources said the flat and long-product ratio is currently at 65:35, which does not augur well for the company, especially because the demand for long products—rods, bars, structurals—is much stronger than that for flat products—hot rolled (HR) and cold rolled (CR) coils and sheets.

“Long products still have a better market vis-à-vis flat products. Hence it is important to have a balanced product mix,” they added. The expansion plan includes setting up a half-million tonne plant for bars and rods, while the remaining capacity will be devoted to structurals.

The company is believed to have sought an additional 10,000 acres of land on a lease basis in the steel city of Jamshedpur from the Jharkhand government to set up the new long products plant. The existing plant and township cover an area of over 14,000 acres. Sources said the proposal is still under review and the matter will be taken up with the board of directors soon.

Earlier, Tisco sought to strike a balance in its product mix through mergers and acquisitions.


Mumbai, Dec. 19: 
The Securities and Exchange Board of India (Sebi) today said the settlement cycle on stock exchanges will be shortened from T+5 to T+3 from April 1. This will give operators just three days, and not five, within which to square up deals.

Brokers welcomed the move, but expressed doubts about whether the Reserve Bank’s electronic settlement cycle can cope with the truncated trading time.

“We are now used to the rolling settlement. However, there are certain areas, such as the ECS, which need to be sorted out,” Ramesh Damani, a prominent BSE broker, said.

The regulator has given stock exchanges, depositories, companies, investors and market participants three months to make arrangements for the switchover. Bourses have already started preparations.

According to Sebi, the Reserve Bank of India is looking at ways to expand Electronic Fund Transfer (EFT) facilities to clear the way for a trouble-free settlement.

Compulsory rolling settlement on a T+5 basis was introduced in 414 scrips from July 2, and Sebi said on May 14 the remaining would be shifted from January 2.

A Sebi group looking into the way bourses have functioned in recent months said the settlement cycle could be shortened further to increase the efficiency of the market. It felt the T+3 system should start from April 1.

In another significant announcement, the group on dematerialisation (demat) recommended the use of debit card by investors for making payments to brokers. The move, which will be taken up with Reserve Bank, will help brokers and clients cope with difficulties which have been thrown up by rolling settlement.

A committee headed by Sebi topgun J. R. Verma will look at ways in which exchanges and companies can verify and respond to rumours on price-sensitive information. Stock exchanges will also be asked to disclose the gross positions for shares at the end of a session.

The committee said the shares of companies that have not signed agreements and established connectivity with either of the two depositories by September 28 will change hands on a trade-on-trade basis in rolling settlement from January 2. These stocks will be shifted to the normal rolling settlement only after the companies become members of a depository.

The Sebi group on risk-management systems for the equity market also met today to assess the progress in making stock exchanges a safer place to invest in.

Stocks tumble

Fears of an escalating political tension between India and Pakistan pulled the BSE sensex down by 73.21 to 3262.67 points today, the sixth consecutive session of losses.


Mumbai, Dec. 19: 
Mahanagar Telephone Nigam Ltd was battered on the bourses today as fears mounted in the market that the possibility of an STD rate war would badly hurt its topline growth this year.

Analysts said almost 30 per cent of MTNL’s revenues come from cross-country STD calls. The sharp STD rate cut announced Tuesday by cellular operators and the entry of Bharti Telesonic’s IndiaOne STD service from January 26 would shatter MTNL’s monopoly.

MTNL has a revenue sharing agreement with Bharat Sanchar Nigam Ltd (BSNL), the other state-owned entity that provides fixed-line telephony in all parts of the country except the two metros of Delhi and Mumbai, for calls originating in its network as long distance calls.

MTNL and BSNL will certainly have to cut their STD rates too though they may choose to wait till the Trai announces its new tariff structure in March. Analysts said the revenues of both MTNL and BSNL would be hurt by the new players like Bharti and Reliance.

This fear today led to massive sales in the MTNL stock from operators and institutions. The stock, which opened at Rs 141, was hammered to an intra-day low of Rs 124.80, before it went up marginally to finish at Rs 130.80, a loss of around 6 per cent over the previous close of Rs 138.65.

Analysts say that everything will depend on how much of STD traffic volume shifts to the cellular operators.

“The low rates will certainly lead to a surge in intra-city cellular call traffic but it might not be all that high,” says Anant Katare, senior telecom analyst at Khandwala Securities, a local brokerage. Sources here added that the success of these operators would depend on the infrastructure network being built.


New Delhi, Dec. 19: 
Cellular equipment makers have agreed to slash their price offers in response to Bharat Sanchar Nigam’s GSM equipment tender by Rs 187 crore.

Three equipment makers — Motorola, Lucent Technologies and Ericsson — reached an agreement with the Telecom Commission today on this prickly issue which had sparked a major controversy over the award of BSNL tenders to the three companies.

As a result of today’s agreement, the overall price of the tender will fall from Rs 2,330 crore to Rs 2,044 crore. Motorola has agreed to cut its price offer by Rs 111 crore, Ericsson by Rs 50 crore and Lucent by Rs 25 crore.


New Delhi, Dec. 19: 
Finance minister Yashwant Sinha today assured the nation that the Indian economy was well prepared to meet any challenges that may arise in the eventuality of a military confrontation with neighbouring Pakistan and stated that there is no cause for worry on the economic front now due to the tense prevailing situation.

“Today’s age is driven in a major way by sentiment. Uncertainty does impact sentiment and it is immediately reflected in some markets. But there is no reason for concern at this point of time,” Sinha told reporters on the sidelines of the Assocham National Summit - ‘India: Agenda for Tomorrow’ here.

“I see no reason for concern at this point of time. I want to assure everybody through you (the media) that we are strong and well-prepared to meet any challenges,” Sinha said on being asked of the threat to the economy arising from a full-scale confrontation with neighbouring Pakistan.

Asked about a possible shortfall in defence expenditure, Sinha said there was no cause for worry as there was no immediate shortage in the defence budget and the government was ready to cover any gap should it arise.

Earlier delivering his address, Sinha asserted that an over 7 per cent growth in GDP was achievable in the coming years and asked the industry to become competitive to face the challenges of globalisation instead of asking for protection.

“There is no place for sector-specific protection. The challenge is to learn from the mistakes and adopt a model so that we have a growth of over seven per cent which is achievable,” Sinha said, adding that the country has the capability to meet the emerging challenges and convert the opportunities to achieve a higher growth, which is also necessary to fight poverty.

Sinha, however, refused to speculate on what the GDP growth figure would be in the current fiscal. He said several agencies had bandied figures ranging from 4.4 per cent to 5.5 per cent.


Mumbai, Dec. 19: 
The board of mutual fund major Unit Trust of India (UTI) is slated to meet Thursday to chart out the strategy for making its flagship US-64 scheme net asset value based (NAV) from January 2. UTI will also reopen the sale and repurchase windows that were temporarily closed from July this year.

Besides, issues raised by the Tarapore committee will also figure in the board meeting. The committee has found several glaring drawbacks in the working of the fund, which includes UTI’s investment in unlisted securities and in shares of certain companies.

The meeting also assumes significance as UTI will, for the first time in its history, announce the net asset value (NAV) of the scheme, till now in the realm of conjecture.

However, it is believed that the meeting will devote maximum attention to the strategy to be adopted once UTI reopens the sale and repurchase window for US-64. The board will decide on the modalities of arriving at the sale and repurchase price for the scheme. Highly placed sources at UTI reveal that the mutual fund major has now virtually decided to allow sales of the units to take place simultaneously along with repurchases. Moreover, the sales and repurchases will function alongside the special window created for small unit holders for redeeming up to a maximum of 3,000 units.

It is learnt that while Sebi has allowed mutual funds to have a gap of 7 per cent between their sale and repurchase prices, UTI is expected to opt for a realistic 3-3.5 per cent gap for arriving at the sales and repurchase price of US-64.

The change in perception is due to the restructuring of the flagship scheme that saw the portfolio witness a drastic overhauling. Real estate, comprising UTI’s offices and residences that formed part of the US-64 portfolio, was recently transferred to the Development Reserve Fund for a consideration of around Rs 700 crore. Most of the amount was reinvested in double “A” corporate paper. The equity ratio is now pegged at 61 per cent, with debt comprising the rest.

The recent moves, coupled with the recovery in the capital markets, have emboldened the mutual fund major to reopen the sales and repurchase windows simultaneously, say industry circles.

Further, the redemptions due to maturity of some of UTI schemes saw unit holders opting to transfer their holdings to other schemes in the UTI portfolio.

“We do not expect redemption pressure in US-64 to escalate in view of the improved market sentiments,” a senior UTI official said. UTI believes that the existing unit holders will wait for a while and recover their losses before they decide to exit the scheme.

The board meeting may also consider the appointment of a executive trustee which has been hanging fire for more than two years now.

It may be recalled that UTI’s decision to suspend all sales and repurchases of US-64 had not gone down well with its legions of small investors that swore by the scheme. Within days of taking the decision, UTI chairman P. S. Subramanyam was forced to resign.



Foreign Exchange

US $1	Rs. 47.77	HK $1	Rs.  6.05*
UK £1	Rs. 69.19	SW Fr 1	Rs. 28.75*
Euro	Rs. 42.87	Sing $1	Rs. 25.70*
Yen 100	Rs. 37.42	Aus $1	Rs. 24.25*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4660	Gold Std(10 gm)	Rs. 4615
Gold 22 carat	Rs. 4400	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7525	Silver (Kg)	Rs. 7540
Silver portion	Rs. 7625	Silver portion	NA

Stock Indices

Sensex		3262.67		- 73.21
BSE-100		1560.93		- 35.84
S&P CNX Nifty	1060.75		- 21.55
Calcutta	 108.49		-  0.96
Skindia GDR	 522.49		-  3.51

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