High Stakes

Mumbai, March 15: Telecom titans are getting ready to splash out money to beef up their infrastructure as they square off for a major slugfest to grab larger slices of a market that is growing at a rate of over 50 per cent a year in terms of subscriber additions.

Last week, Anil Ambani announced with great fanfare that Reliance Communications Ventures Ltd (RCoVL) would make a capital investment of Rs 5,000 crore a year over the next three years ? and dared competitors to come up with the big bucks.

At least one rival has picked up the gauntlet: Cayman Island-based Hutchison Telecommunications International Ltd (HTIL), which owns a combined direct and indirect stake of 53.2 per cent in Hutchison Essar, has announced plans to invest between HK$9 billion and HK$10 billion (Rs 5,139 crore to Rs 5,719 crore) this year to expand its telecom operations in India. The investment plans were announced last week when HTIL filed its annual results for the year to December 31, 2005 with the Hong Kong stock exchange.

Hutchison’s fund commitment to India is more than three-and-a-half times the capital investment of HK$2.74 billion (or Rs 1,564 crore) that it made in 2005. It accounts for around 69 per cent of the overall capital investment of HK$13.5 billion to HK$14.5 billion that the telecom giant plans to make this year in the nine countries where it provides cellular services.

The over-emphasis on India is but natural since Hutchison Essar is its biggest telecom operations and contributes 41 per cent of the group’s turnover that touched HK$24.36 billion (Rs 13,900 crore) in the year ended December 31, 2005.

The roughly Rs 5,700 crore worth of investment this year is designed to double the size of the Hutch network. The money will be used not only to expand the existing Hutch operations but also those acquired through BPL.

The acquisition of BPL Cellular, the service provider in Maharashtra and Goa, Tamil Nadu and Pondicherry and Kerala, was completed on January 2 and the next step is to obtain regulatory approvals for the acquisition of BPL Mumbai. After that, the group plans to turn its attention to the assimilation of Essar Spacetel Ltd, which provides telecom services in the seven areas that Hutch doesn’t cover.

The other big player, Tata Teleservices Ltd, is also aiming to invest anything between Rs 5000 crore and Rs 6000 crore; the final figure will be known only later this month.

But the big daddy in telecom business is state-owned Bharat Sanchar Nigam Ltd (BSNL), which plans to invest Rs 19,400 crore next fiscal with as much as 80 per cent of the investment earmarked for the expansion of the mobile network and broadband services. It also aims to upgrade its switching system, wireless and other IT-related services.

Ambani, who will be relying on a combination of debt and internal accruals to fund his capital expenditure plans, clearly sees the state-owned telephony major as his biggest challenge and named it as the biggest threat to RCoVL.