Basic-cellular spat takes new turn
BSNL gets new head
Bata sets out on recast mission
Sterlite option to fund Hind Zinc buyout
Idle real estate to help SAIL prune its losses
Squeeze on office space rental
Power board move shocks north Bengal tea workers
MFs cool about foreign securities

New Delhi, March 29: 
In a fresh salvo that keeps the raging battle between basic and cellular operators on the boil, the fixed line telephone operators have approached the Telecom Regulatory Authority of India (Trai) pressing for permission to impose airtime charges for their limited mobility service.

The basic operators, who won the right to offer the Wireless in Local Loop (WiLL) mobile service less than a fortnight ago, reckon that they should be granted the same dispensation that is provided to cellular service providers.

The Association of Basic Telephone Operators (ABTO) has pointed out that Trai does not consider the WiLL mobile service as a cellular mobile service. Consequently, they are not allowed to charge airtime like cellular mobile service operators.

In a letter sent to Trai, the apex body for fixed line service providers has said, �At present, WiLL(M) services do not have a level playing field with cellular mobile services due to which the rollout of WiLL(M) is being affected. We request Trai to apply the same principle for cellular mobile service providers (CMSPs) also in order to ensure parity between these two services.�

The association has suggested that, �the cellular operators should not be allowed to charge airtime on the same principle applicable to fixed line operators. There should be no airtime charge on incoming calls for cellular subscribers as in the case of WiLL(M) and the local call charges should be similar to WiLL(M), that is Rs 1.20 for a 3-minute call.�

The letter has provided another option for the consideration of the regulator. �We suggest that WiLL(M) should be treated as basic service only and access charges as applicable in the ratio of 60:40 at present should continue. We are sure Trai will consider these recommendations that are consumer friendly and in public interest,� says the letter.

At present, when a fixed line phone subscriber calls a cellular subscriber, the fixed line operator retains 60 per cent of the call charge and passes on 40 per cent of the charge to the cellular operator.

The association feels this will increase the level of competition in the industry, thus stimulating demand for telecom services resulting in greater tele-density in both rural and urban areas. It has urged Trai to take immediate action in this regard so those operators do not keep on extracting these undue charges from CMSP consumers.


New Delhi, March 29: 
It is now official: D.P.S. Seth has been removed as the chairman and managing director of Bharat Sanchar Nigam Ltd.

Seth had got into several wrangles with Union communications minister Pramod Mahajan over a number of issues and has now paid the price.

Bharat Sanchar Nigam Ltd has a new CMD in Prithipal Singh whose appointment to the post was accepted by the communications ministry on Thursday. He will also hold the additional charge of member operations. Seth has been allocated the post of member services in BSNL.

Mahajan and Seth could not agree on a number issues like the cellular equipment tender, purchase of telecom switches and also the controversial issue of divesting government�s stake in BSNL.

Sources in the communications ministry said, �The pressure to replace Seth was also made from a few telecom equipment manufacturers who had been lobbying against him for his �inflexible� attitude while clearing tenders. But the issues relating to the cellular equipment tenders awarded by BSNL and his opposition to disinvestment were the main reasons for his removal.�

Mahajan wanted a rebid of the Rs 2,300-crore cellular tender since he felt that the price of the equipment was too high and could be brought down through renegotiations.

Seth, however, believed any delay or a possible scrapping of the tender would delay BSNL�s cellular foray by a year.

In the end, Seth had to capitulate and the companies marginally brought down the cost of their equipment.

�This was a crucial issue since it was important for BSNL to have a head-start over the private operators and position itself as the third cellular operator in each telecom circle. It was essential since the process of bidding for the fourth cellular operator had already begun,� said sources in communications ministry.

Meanwhile, another board member, director (finance) S.P. Purwar is likely to leave BSNL as his request for voluntary retirement has been accepted.

The BSNL board consists of chairman and managing director and five full-time directors.


Calcutta, March 29: 
City-based shoe major Bata India Ltd may hive off some of its operations and amalgamate its subsidiaries�Bata Properties Ltd and Coastal Commercial and Exim Ltd.

The board of Bata India Ltd met today to approve the audited accounts of the company for the year ended December 2001 and to work out a business restructuring strategy.

The company has witnessed a 74 per cent fall in its net profit from Rs 15.60 crore till December 2000 to Rs 3.98 crore till December 2001. Total income went up marginally from Rs 761.29 crore to Rs 772.52 crore.

Emerging from the marathon five-hour meeting, P.K. Khaitan, director on the Bata board said, �The board today adopted the annual accounts. Discussions were also held on restructuring the company�s business, which may see the hiving off of some manufacturing facilities. However, the units to be hived off have not been identified. The company will also have to weigh the tax implications before taking such a decision.�

Bata manufactures different lines of footwear at Batanagar, Faridabad in Haryana, Bataganj in Bihar, Peenya near Bangalore and an export-oriented unit at Hosur in Tamil Nadu. It also has a tannery at Mokameghat in Bihar.

A company release issued today said the board held detailed discussed on measures to reorganise some of its business operations following a scheme of arrangement pursuant to the provisions of sections 391 and 394 of the Companies Act 1956.

Section 391 enables a company to compromise or make arrangements with creditors or members and Section 394 gives it the power to facilitate reconstruction and amalgamation of companies, which industry watchers say empowers Bata India to merge two of its subsidiaries and reorganise operations.

Bata has identified certain areas to improve its financial performance. These are innovative product development, new merchandise, brand promotion, opening large format stores, strengthening distribution logistics, working capital management, cost reduction and cost control in all areas of its operations. �The company has decided to come up with focused retail stores according to the locality,� Khaitan said.

Bata India is in the process of creating a four-tier hierarchy of dedicated stores, each designed to meet the needs of a particular kind of customer.

At the top-rung is the international store which stocks Bata�s international range and the imported brands, which will be located in metro cities. The second order of stores, the city store, is also located in the metro cities in upmarket commercial locations, and caters to the needs of fashion-oriented middle and high-income group. Family stores are very much an integral part of the Bata chain and feature in high-traffic commercial locations in major towns. They showcase basic to mid-range footwear for the value-conscious consumers. At the base is the bazaar store, located in high-traffic and densely populated markets, offering basic and volume brands.


Mumbai, March 29: 
Sterlite Industries (India) Ltd plans to hit the debt market to part-finance its acquisition of a 26 per cent stake in Hindustan Zinc Ltd (HZL). According to estimates, the non-ferrous metals major is likely to raise close to Rs 500 crore in debts in the next fiscal to fulfil various commitments.

Sources close to the company confirmed that it was looking at the debt markets to part-finance the acquisition and added that it would be in a position to raise the required funds at attractive rates.

In addition to the debt market, from which Sterlite plans to raise over Rs 150 crore, it plans to invest close to Rs 275 crore in a special purpose vehicle�Sterlite Opportunities and Ventures Ltd�floated for the acquisition of HZL.

The acquisition comes at a time when Sterlite is implementing a voluntary retirement scheme, apart from an ambitious buy-back programme and a planned expansion in the smelter capacity of the newly acquired Balco. While these would need substantial investment, Sterlite will also have to announce an open offer for HZL shareholders.

Earlier, Sterlite had announced a buy-back price of Rs 150, which was split into cash and non-cash components. While Rs 100 will be discharged in cash, the balance Rs 50 will be paid through allotment of 10 per cent secured non-convertible debentures, redeemable 35 per cent in the fourth year, 35 per cent in the fifth year and 30 per cent in the sixth year.

Crisil said Sterlite will have to issue debentures of over Rs 140 crore as part-payment of this buy-back programme.


Calcutta, March 29: 
Steel Authority of India Ltd (SAIL) is likely to sell its surplus real estate to reduce its mounting losses which are set to erode the steel giant�s net worth by around 50 per cent.

SAIL spokesperson said the company is currently in the process of �identifying surplus real estate� to put them to �gainful use.�

She, however, declined to comment on whether the company would ultimately sell its surplus real estate.

The spokesperson further pointed out that an internal committee has been formed to identify surplus real estate in and around the plant-townships of the company.

SAIL can mop up a substantial sum from the sale of the huge plots of land it owns in the four steel townships.

The company suffered losses of over Rs 1,449 crore in the last two financial years even after the government approved its financial restructuring plan by writing off over Rs 5,000 crore of debt.

The public sector �navratna� has recorded a loss of Rs 1,389 crore in the first nine months of the current financial year. Sources said the loss for the entire fiscal may go up to over Rs 1,500-1,600 crore.

�Sales in the last quarter have gone up substantially. But realisations are still so poor that the margins will not be able to offset losses,� a senior SAIL official admitted.

SAIL�s equity base stands at Rs 4,130 crore and reserves are at a little over Rs 430 crore. Hence, the three-year accumulated losses till March are likely to be over Rs 2,700 crore.

Sources said the company is making a desperate bid to cut losses so as to avoid becoming a potentially sick company.

Besides selling off non-core businesses, including captive power plants of the four integrated plants at Durgapur, Bokaro, Bhilai and Rourkela, the company is selling or leasing out its surplus quarters to garner funds.

The SAIL spokesperson said the company has earned around Rs 200 crore for the sale or lease of quarters in the current financial year. The response was so overwhelming that substantial earnings are expected from the sale of quarters next year as well.

The company has also hived off its captive power units in four integrated steel plants into separate joint ventures. While the National Thermal Power Corporation has entered into a joint venture agreement with SAIL for the captive power units of the Durgapur, Rourkela and Bhilai plants, the steel major has inked a pact with Damodar Valley Corporation for the captive power unit of Bokaro Steel Plant.

But the company�s failure to sell off its special steel manufacturing unit at Salem, for political reasons, has been a cause of concern.


New Delhi, March 29: 
Office space rentals are falling across the country, clobbered by the downbeat business sentiment after last year�s string of terrorist attacks in the US and India and a badly skewed supply-demand scenario in all four major metros.

The increase in office space has occurred because of two reasons: first, in cities like Delhi a number of new commercial plazas have been set up but these have had few takers; secondly, in cities like Bangalore, a number of infotech-related outfits have moved to newer and larger establishments but there have been virtually no takers for the office space they have relinquished in the older buildings.

This has created an urban wasteland of over-hyped market projections and collapsing desire to invest in new office space in a badly roiled economy.

�Demand is so dull that places where office spaces used to be snapped up earlier are lying idle. In Delhi, only three A-grade office buildings have been completed, yet we are seeing a 12-15 per cent fall in rental prices in the central business district. The empty office space amounts to around 1,50,000 square feet at present in the main central business district,� said Sanjay Verma, director Cushman & Wakefield.

�The situation is more or less same in the other major metros�Mumbai, Calcutta, Bangalore and Chennai. In Mumbai, in the CBD area and Bandra-Kulra business district, the prices are depressed within the range of 3-8 per cent due to excess supply,� Verma added.

In Delhi, new office space has been created by the Statesman House, Naurang and Birla House�all in Connaught Place. In the satellite business district of Gurgaon, prices have eased by 5.56 per cent. The vacancy rate have increased in Gurgaon by 3.47 per cent reflecting the fall in demand by the call centres.

Anurag Munshi, senior manager, research, Jones Lang LaSalle said, �The prices in Mumbai and Bangalore had been decreasing. Now it has gone down more. But Delhi is surprising as the office space in CBD area is so difficult to find. But demand is low and the price depression will continue for some time.�

The gap between supply and demand in Bangalore and Chennai has happened for a different reason altogether. �Most of the IT companies that have grown in these cities and have shifted to a newer place. But the vacated buildings are not finding new owners. This is again unnatural because the offices are ready to move in,� said Verma.

Taneja Chakrovarti, head of research, Chesterton Meghraj, said, �The prices are under pressure due to the excess demand scenario. Bangalore is suffering most as the IT scenario is bleak. Almost 70 per cent of the business comes from call centres. Fewer call centres are now being set up, so demand has tumbled.�

Prices in Bangalore have come down by more than 15 per cent with the business in CBD areas going slow.

In Calcutta, the scenario is grim. While rentals have remained stagnant over the quarter, supply has increased by 3.5 lakh square feet. At present, 2-2.5 lakh square ft is lying vacant from the older buildings in the CBD area of Dalhousie, Park Street and Camac Street. The capital values have come down to Rs 23-38 per square ft, an 18-20 per cent decline in rentals.

�As it is, Calcutta is a slow-moving city and now the problem has increased two-fold. With some of the projects ending, the rentals are under pressure at present,� said Verma.


Calcutta, March 29: 
The north Bengal tea industry is heading towards labour unrest, following the West Bengal State Electricity Board�s decision to disconnect power supply to workers� houses.

The decision to cut power supply was taken after the workers refused to pay electricity on a slab-based rate following a recent tariff revision. The north Bengal tea industry employs about 9,00,000, of which 1,30,000 are temporary workers.

Representatives of the Indian Tea Association (ITA) have already met state labour minister Md Amin to discuss the issue and the minister has assured them of sending suitable directives to the WBSEB to ask the board to review its position.

When contacted, WBSEB chairman G.D. Gautama said, �WBSEB cannot take any decision in this matter. It is for the West Bengal Electricity Regulatory Commission (WBERC) to take a final decision and the tea industry will have to appeal to the regulator.�

Tea estate workers were provided with electricity pursuant to a tripartite understanding reached in 1991 between the management, the government and the WBSEB, whereby electricity consumed by labour resident in tea estates was billed through a master meter provided on each estate.

WBSEB had notified a uniform gross rate applicable to tea estate labour, which stood at Rs 1.15 per unit prior to the revision.

Under the existing system, the management of the tea estates has to recover the cost of electric consumption from each labour quarter and pay the same to the board, thereby saving it the costs of billing individual labour quarter and collection of energy bills.

�A recent notification issued by the WBSEB revising domestic tariffs categorises tariffs for tea garden workers under Rate A. This has altered billing from a hitherto flat rate to a slab-based rate, enhancing the applicable rate from Rs 1.15 per unit to Rs 3.40 per unit, which is the highest point in the slab,� a senior ITA official said.

The ITA had requested the board to arrange direct billing and collection for workers� quarters as is done for all domestic consumers in the state, so that the labourers pay for electricity consumed at rates applicable to other consumers in the same category.

The WBSEB has, however, refused to provide direct billing arrangement to the tea estate labour. Since tea estate labourers are not in a position to settle the bills electricity provided to labour quarters in large number of tea estates in Dooars and Terai region of north Bengal has been disconnected.


Calcutta, March 29: 
The mutual fund industry is not very upbeat about investing in foreign rated securities. Experts say, there could be some short-term opportunities, but long-term investments in foreign debt instruments is not an exciting proposition.

Finance minister Yashwant Sinha had announced in his budget proposals for 2002-03 that mutual funds would be allowed to invest in rated securities abroad. Indian mutual funds could so far invest only in American and global depository receipts (ADRs and GDRs) of Indian companies.

ICICI Prudential managing director Shailendra Bhandari says: �Return on foreign debt instruments is much lower than in India. But to derive the actual return on investments abroad, one must also consider the depreciation of the Indian currency.

�In the last one year, the Indian rupee depreciated by about 4 per cent against the US dollar. All said and done, the rupee is still a managed currency, and it should not see any dramatic depreciation.

�Even the combined return on investments is not attractive. However, there could be some short-term opportunities, say when the rupee is expected to fall, but long-term investments in foreign debt instruments are not worthwhile.�

However, the mutual fund industry sees the finance minister�s move as a good beginning and hope that investment in equities too would be allowed in the foreseeable future.

The Reserve Bank of India has yet to formulate the guidelines, but the industry believes that the apex bank may stipulate that mutual funds can invest only in instruments with the highest security ratings. The industry may also be barred from taking short-term punts on the dollar, experts feel.

Senior officials of Unit Trust of India welcome the move, but feel that the proposition is new and requires extensive study. �There is enough expertise in the country for overseas investments. Yet, there�s need to study the markets before we take the plunge,� a UTI executive director said.


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