Wireless Federation

Outdoor advertising is one of the biggest marketing media in Kenya where mobile operators are spending excessively. “It’s the kind of spending that in the past has been associated only with cigarette brands or Coca-Cola,” said Michael Foley, who runs the East African operations of Essar Group of India, a company that is backing a new wireless network scheduled to begin operating in Kenya. Safaricom dominates the mobile business in Kenya for years, a local company whose biggest shareholder is Vodafone, with 85 percent and the rest hold by an operator in Kuwait, Zain. Two newcomers will soon join the chain. As Essar, France Télécom have recently acquires a controling stake in Telkom Kenya. They are planning to build a new mobile network that may market under the Orange Brand. According to a local media report, Telecommunications companies are expected to spend about 4.7 billion Kenyan shillings (or about $72 million) on advertising this year. Safaricom alone accounts for 2 billion shillings in spending. Given its dominant position, Safaricom plans no new directions in its advertising, Mr. Joseph, the chief executive, said.

Vodafone could be forced to pay more than €2.4 billion (US$4 billion) if it loses its court case relating to tax claims by the Indian government over its Hutchison Essar acquisition, a Total Telecom report said.

The Total Telecom report quoted the Financial Times saying that “the UK mobile phone group could face a penalty of 100% of the tax owed plus 12% interest a year if it loses the case.”

India is trying to levy €1.24 billion (US$2 billion) of capital gains tax on Vodafone’s 2007 $11 billion acquisition of Hutchison Essar, despite Vodafone being the buyer and not the seller of the asset, on the grounds it should have withheld the tax on behalf of the government.

Vodafone argues that the transaction is not taxable because the deal itself took place overseas.

The acquisition of Essar saw a Dutch company controlled by Vodafone pay a Cayman Island-registered company controlled by Hutchison Whampoa €7 billion (US$11 billion) to buy another Cayman Island entity that indirectly held a controlling stake in the Indian operator.

However, India’s government contends that since Essar’s operating assets were based in India, the deal is subject to capital gains tax.

The development relates to a retrospective amendment to the country’s tax law, which states that an entity that did not withhold tax when it should have done is classified as in default.

This means that if Vodafone loses its case, the government can then award a penalty which would bring the final sum payable by the operator to over €2.4 billion (US$4 billion).

According to the Financial Times, Vodafone opposes the amendment on the grounds that India’s constitution forbids imposing such penalties retrospectively.

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Bharti Airtel builds on its market lead with biggest gains followed by Vodafone Essar.
Indian GSM subscriptions reached 184.67 million in February, up 6 million from a month earlier, the Cellular Operators Association of India (COAI) said Monday.  

India’s biggest carrier by subscribers Bharti Airtel recorded the biggest gains, adding 2.25 million users, giving it a total customer base of 59.67 million.

That figure represents a 32.31% market share, according to a statement from the COAI.

Vodafone Essar added 1.41 million customers in February, up from the 1.28 million it gained a month earlier, giving it a total of 42.55 million subscribers.

Idea Cellular and state-run Bharat Sanchar Nigam Ltd. (BSNL) gained 918,871 and 824,284 new users respectively. At the end of February Idea had 22.87 million customers, while BSNL reported 34.57 million, giving it a market share of 18.72%.

However, the figures published by the COAI do not include Reliance Communications, which is predominantly a CDMA operator, but also operates what is currently a limited GSM service. It had 5.7 million customers at the end of January, according to the COAI.

GSM subscriptions are set to get a further boost, since nine of India’s CDMA operators, including Tata Teleservices and the aforementioned Reliance, were granted licences in 2007 to enter the GSM space.

Tata in January issued an RFP for a network contract valued at $4.8 billion, with reports at the time suggesting the deal could go to Huawei, Nokia Siemens Networks or Ericsson .

“India is the world’s fastest growing mobile phone market with the lowest call tariffs of below two U.S. cents [per minute]. The market has emerged as the cynosure of global telecoms giants,” said the COAI in a statement.

Virgin Mobile became the latest global player to enter the Indian market, when it signed a deal last week to sell Virgin-branded services on Tata’s CDMA network.

According to the COAI, the Indian government aims to reach a total of 500 million mobile users – both CDMA and GSM - by 2010, having passed the halfway point to that total last year.

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To consolidate its position in the highly competitive mobile market, the Bharat Sanchar Nigam Limited (BSNL) has decided to expand its GSM capacity across India. Starting from the southern States, for which it has placed orders to add 50-lakh new connections, the State-owned telecom company will soon be floating more tenders for other regions.

Legal hurdle

To avoid any operational or legal hurdle, senior officials have decided to go ahead with the existing vendors for telecom circles in the southern States so that capacity expansion plan could be completed without any delay and more lines added to counter the challenge being posed by the private mobile operators.

The BSNL wants to come out from the last year’s setback when its mega tender of 4.5-crore lines was curtailed by half.

Future requirements

“Apart from the South, we are also adding our capacity so that we can catch up with private telecom players. In the North and East regions, around 1.5-crore new lines will be added. These additions will not only meet our future requirements but will also help us in achieving our aim of reaching 10-crore subscriber base by 2010, with a market share of 33 per cent,” said a senior official.

The BSNL, which was ranked second a couple of years ago, has been slipping in ranking as private players have been regularly expanding their network and adding more subscribers.

Delay in capacity expansion has been hurting expansion of the BSNL’s mobile subscriber base.

Ranks fourth

With 3.7-crore subscribers, the BSNL now ranks fourth among all mobile companies, the leading firms being Bharti Airtel (5.7-crore subscribers), Reliance Communications (4.2-crore), and Vodafone-Essar (4.1-crore) respectively.

Among the four, Reliance Communications is the only company whose services are mainly based on CDMA platform, while the other three use GSM technology.

Stiff competition

Among the GSM mobile operators, the competition is stiff between four leading operators — Bharti Airtel, Vodafone-Essar, BSNL and Idea (2.1-crore subscribers). Last month, mobile companies added a record 87.7-lakh new mobile subscribers, for the first time surpassing even monthly additions by the Chinese companies.

Leadership position

While Bharti Airtel added over 22-lakh new subscribers in January 2008, Vodafone Essar added 12.8-lakh, BSNL 11.8-lakh and Idea 9-lakh. “New capacity building will help us to retain our leadership position again in the highly competitive Indian mobile market,” the official added.

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India’s Essar Communication Holdings has bought 49 percent in Econet Wireless International, which has 70 percent of the shares in the third mobile operator in Kenya. Econet Wireless Kenya, which is yet to roll out its services, has been looking for a suitable financier since the Communications Commission of Kenya cleared its licence in September. By buying into the Econet parent company, Essar intends to inject capital for the roll-out of the Kenyan operations. Lawyers who advised on the deal told the Business Daily that Essar Communication will provide close to half a billion dollars for the roll-out. “Essar also intends to bring in a new model which is similar to those used in places like Indonesia, Philippines, India and Pakistan, which will offer competitive pricing and aggressive network roll-out,” said Anjarwalla and Khanna Advocates, noting that the deal would not affect the current Kenyan ownership structure. Econet had reportedly tried to get the foreign financier to be incorporated as one of its partners. This was however turned down by the government since it was against the licensing rules. Econet was licensed in 2003 but has not been able to roll out service due to protracted court battles. Econet Wireless International has a presence in eight African countries, Europe and the East Asia Pacific region.

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Econet Wireless Kenya has received a new lease of life following the buy-out of the majority share holder by Indian mobile telecommunication Essar Communication, a subsidiary of Essar Global.

Essar has recently bought 49% of Econet Wireless International, which has 70% controlling shares in the third mobile operator in Kenya.

Econet which is yet to roll out its services, despite being issued with the frequency and licence, has been scouting for a suitable financier since the Communications Commission of Kenya cleared it in September .

By buying into the Econet parent company, Essar intends to inject capital for the roll out of the local third mobile network operator.

According to law firm Anjarwalla and Khanna Advocates, who advised on the deal between Essar Communications and Econet Wireless International, Essar Communication will provide close to “half a billion dollars for the roll out. ”

Essar also intends to bring in a new model which is similar to those used in places like Indonesia, Philippines, India and Pakistan, which will offer competitive pricing and aggressive network roll out” said the firm, noting that the deal would not affect the current ownership structure since shareholding would remain the same.

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Vodafone Essar, Indian infrastructure company Bharti Infratel and mobile operator Idea Cellular have agreed to form an independent tower company, Indus Towers, to provide passive infrastructure services in India to all operators on a non-discriminatory basis. This follows the infrastructure sharing MoU signed between Bharti and Vodafone in February. The independent tower company initiative is a major step towards achieving Indian regulator TRAI’s recommendations for passive infrastructure sharing and will create a lower cost and more competitive operating environment for mobile operators in India. The three companies will each merge their existing passive infrastructure assets in sixteen circles in India. Vodafone Essar and Bharti will own approximately 42 percent each and Idea will own the remaining 16 percent stake in Indus Towers. Indus Towers will have approximately 70,000 sites at inception and will undertake a rollout of telecommunication infrastructure to propel the mobile sector towards achieving India’s teledensity and rural coverage goals within the next few years.

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Supported by a mass media saturation advertising blitz, UK-based mobile giant Vodafone Group will begin using its own name in India from Friday, following its USD11.1 billion acquisition of India’s third largest mobile operator, Hutchison Essar. The exercise, thought to be one of the world’s biggest-ever rebranding campaigns, is designed to touch over 35 million subscribers and 400,000 shops, and is seen as vital to the British firm’s earnings growth as it struggles to contend with market saturation in its core markets. Vodafone is looking to make its Indian unit the number one mobile provider in the country by 2010, currently one of the world’s fastest-growing cellular markets with more than six million net additions per month.

To back up the drive, Vodafone intends to continue work on a major expansion programme designed to increase its network footprint, particularly in the largely underserved rural regions where close to 70% of the population lives. A spokesman for Vodafone, which is ploughing USD2 billion into India over the next few years, said: ‘We used to be rolling out 900 cellular towers a month (across the country), now it is 1,800 to 1,900. We used to be adding around a million customers a month, now we’re adding around 1.7 million a month.’ Vodafone has also announced plans to enter into a network sharing plan with Bharti Airtel, India’s leading mobile phone company by subscribers, to cut network expansion costs and says it is open to deals with other companies.

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GSM operators added 5.95 million subscribers in August to take their total subscriber base in India to 147.7 million,quoting figures released by the GSM representative body, the Cellular Operators’ Association of India (COAI). The 5.95 million GSM subscriber addition excludes subscribers added by Reliance Telecom in August. Bharti Airtel added 2.05 million users in August and lifted its user base to 46.8 million for a 31.7 percent share of the GSM market. Vodafone Essar added 1.7 million users to take its subscriber base to 34.1 million. It has a 23.1 percent share among GSM operators. State-owned operator Bharat Sanchar Nigam (BSNL) added 0.72 million users in August, taking its user base to 29.7 million. Its share among GSM players is 20.11 percent. Idea Cellular gained 0.86 million subscribers in August, lifting its user base to 17.9 million and giving it a GSM market share of 12.10 percent.

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Just months after Vodafone Group acquired management control of Hutchison Essar, the British firm is headed for a fall out with its Indian partner, the Essar Group. The disagreement comes over Essar Group company BPL Mobile’s move to apply for licences covering 21 of India’s 23 circles. The application for the new licences was not made in the name of BPL Mobile, but a subsidiary called Shippingstop.com. BPL Mobile owns 51.24% of shippingstop.com; the rest is held by a former holding firm of BPL Mobile, BPL Communications.

Earier this week the Cellular Operators’ Association of India (COAI) began lobbying the Department of Telecommunictions (DoT) for an enquiry into the ownership of new licence applicants. Under Indian legislation a company may not have a stake - either direct or indirect - in more than one licensee providing the same service in the same service area. Essar, a 33% owner of Vodafone Essar, is also a shareholder in Mumbai-based cellco BPL Mobile. If BPL Mobile is awarded licences across India, then Essar would end up being owner of two telecom companies in the same licensed areas, which would run contrary to rules. The Ruia family-run Essar dismissed the idea saying the law only bars a stake of more than 10% in two companies in the same licensed area. ‘We have a 33% stake in Vodafone Essar and only a 9.9% stake in (BPL Mobile). So where does the violation arise?’ said Essar spokesman Manish Kedia.

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