Telecom Competitiveness, Merger and Acquisitions, the new Idea for Vodafone to help their customers.

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Abhishek Shringi, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


The market redesign of telecom market by the launch reliance jio has re-triggered the trend of mergers and acquisitions among tel-cos. The sector of telecommunication has seen several mergers in the past 4 years’ like MTS and Aircel merging in Reliance communications. But this merger talks between is Idea and Vodafone is about the fight to become no. 1 tel-cos in the country. It is about adding new customers and grow revenue market share(RMS), adding value to customer service by the high end experience of Vodafone and Idea’s distinct corporate ecosystem to drive the targeted synergies towards a healthier bottom-line. This merger will result in the country’s largest tel-co replacing Bharti Airtel.

Reliance Jio started its work by officially acquiring 95% of the shares of Himachal Futuristic Communications Ltd (HFCL) in 2012. But this plan started much before in 2010 when reliance industries on back hand with help of HFCL took PAN India license for 4G spectrum such that the other companies does not come to know and the spectrum could be purchased at much lower cost in 2010 spectrum auctions by TRAI. This blasting entry by Reliance industries in telecom sector in 2012 via Project Vijay, later changed to Reliance Infotel and then Reliance Jio created a bruising impact on the existing telecom companies in the market like Airtel, Vodafone, Idea, Tata Docomo, and BSNL. Specially the free voice and data service by Reliance Jio that was to be given till December 2016 and later extended till March 2017 has resulted in worse quarter for telecom companies disturbing their revenue model and decreasing their profits by as much as 60%.

To fight the current scenario Vodafone Group doesn’t have much of the choice but to accelerate its expansion moves in India- likely with the help of Idea Cellular. Although this acquisition will have several road blocks like Indus tower stake holding, regulatory hurdles associated with spectrum caps and significant market power in terms of combined customer base and RMS, but it can be dealt in a year time and by surrendering excess spectrum. Another major problem the existing tel-cos face against Jio is that they own license of only limited states across India like Idea have of only 11 circles, Vodafone in 14 circles, airtel in 16 circles only whereas Reliance Jio owns PAN India license across the country.

In a country like India whose telecommunication network is the second largest in the world by number of telephone users (both fixed and mobile phone) with 1.053 billion subscribers as on 31 August 2016 this process of competitiveness and mergers will not only create a big telecom giant in India but also will increase the competitiveness in the Indian telecom market in terms of providing quality service, technology and providing a competitive pricing to customer base in terms of adding value for them.  And this competition will further facilitate a faster growth of country in a new direction towards the new era of digital transformation. The path on which the journey of success has started and will go beyond the infinity.

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Will IIT Kharagpur become an”Institute of Eminence”?

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Shubhangini Rastogi, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


Finance minister Arun Jaitley had announced in the 2016 budget to enable regulatory architecture to 10 public and 10 private institutions to emerge as world-class teaching and research institutions.

HRD Ministry led by Mr Prakash Javadekar has finalized on the regulations to set up these `world class institutes’ deciding to name them as `Institutes of Eminence’.

There have been changes made to the requirements to be fulfilled to compete for the spot. The corpus amount requirement has been significantly brought down for private institutes from the originally proposed Rs 500 crore to just about Rs 60 crore. They have also pulled down enrollment requirements to 15,000 students from 20,000 and keep Faculty Student ratio at 1:20 from initial 1:10.The regulations also clearly say that UGC regulations will not be applicable in most part to these 20 institutes.

The changes to the Regulations have been made following the feedback the ministry received on them after they were put in the public domain.

It is expected that the HRD ministry will be able to take the proposal to Cabinet in April-May and notify them in June this year. Once Cabinet approval comes through, an Empowered Experts Committee will be appointed to conduct the screening process for the aspiring institutes which will be able to apply within 90 days of notification.

Now the question is : Will IIT Kharagpur make it to the much coveted list of Institutes of Eminence?

Indian Raliways: Improving Infrastructure

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Glen Savio Palmer, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur

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The Indian Railways is one of the largest transport and logistics networks of the world. It runs about 12,000 trains, carries over 23 million passengers daily and connects about 8,000 stations spread across the country. Moreover, Indian Railways runs more than 7,000 freight trains per day carrying about 3 million tonnes of freight every day.

The Indian economy has emerged to become the fastest growing economy of the world today. However, Indian Railways has not been able to capture this growth due to unavailability of wagons and lack of infrastructure, thereby losing share steadily to roads.

To increase its market share in the transportation of bulk and non-bulk freight, the Central government has been steadily increasing investments in railway infrastructure. The budget allocation was increased to ₹ 643 billion in 2014-15 from ₹ 593.6 billion in 2013-14. Presently, the focus is on finishing the capacity-augmentation projects which have the highest rates of return. There are 154 New Lines, 42 Gauge Conversion, 166 Doubling and 54 Railway Electrification projects across the country at a cost of ₹ 285,652 crore (US$ 42.87 billion). For Railway Electrification projects, the cost as on April 1, 2014 is estimated to be ₹ 6,692 crore (US$ 1.0 billion).

In August 2014, The Department of Industrial Policy and Promotion (DIPP) introduced and permitted 100% FDI in certain sub-sectors of the Indian Railways. The revised FDI policy allows FDI in the construction, operation and maintenance of only the following:

• Suburban corridors through public private partnership (PPP)

• High speed train projects

• Dedicated freight lines

• Rolling stock including trains sets and locomotive/coaches manufacturing and maintenance facilities

• Railway electrification

• Signalling system

• Freight terminals

• Passenger terminals

• Testing facilities and laboratories

• Non-conventional sources of energy

• Railways technical training institute

• Concession of standalone passenger corridors (branch lines, hill railways etc.

• Mechanised laundry

• Rolling stock procurement

• Bio-toilets

• Technological solution for manned and unmanned level crossings

• Technological solutions to improve safety and reduce accidents

Some of the major developments and investments in the railway sector are:-

1.  Japan International Cooperation Agency (JICA) granted the Madhya Pradesh Government a loan of ₹ 12,000 crore for Indore and Bhopal metro rail projects

2.  Japan will finance India’s first bullet train between Mumbai and Ahmedabad at less than 1% interest rate, on the condition that India buys 30% of equipment from Japanese firms. The cost of the project is almost ₹ 98000 crores.

3.  Indian Railways issued a Letter of Award to US-based General Electric (GE) for a ₹ 14,656 crore (US$ 2.2 billion) diesel locomotive factory project at Marhowra, and to French transport major Alstom for ₹ 20,000 crore (US$ 3 billion) electric locomotive project in Madhepura, both in Bihar.

4.  An MoU was signed between the Ministry of Railways in India and the Czech Railways (Ceske Drahy) and Association of Czech Railway Industry (ACRI) of the Czech Republic on technical cooperation in the field of the railways sector.

Railway infrastructure requires large investments that cannot be undertaken out of public financing alone. Hence the Government has resorted to Public Private Partnerships (PPPs) to attract private capital and the techno-managerial efficiencies associated with it.

1.  Railways Infrastructure for Industry Initiative- This policy was announced in 2008-09 to attract private participation in rail connectivity projects so that additional rail transport capacity can be created.

2.  Private Freight Terminals (PFT) Scheme- It was launched in May 2010 in a bid to develop a network of freight terminals with efficient and cost effective logistic services and warehousing. The development of PFTs is to be funded through PPP. As of 2012-13, 43 proposals had been received for development of PFTs of which 38 had been finalised.

3.  Automobile Freight Train Operator Scheme (AFTO) and Special Freight Train Operator Scheme (SFTO)- These schemes were introduced in 2010 to increase the Railways’ share in the transportation of automobiles and commodities like fertilizers, molasses, edible oil, caustic soda, chemicals, petrochemicals, alumina, bulk cement and fly ash. These schemes have been further liberalised in 2013. For AFTO, the Railways received proposals from two firms out of which one had been given approval as of 2012-13. This AFTO will manufacture a new type of automobile wagon that has been developed by RDSO.

4.  Liberalised Wagon Investment Scheme and Wagon Leasing Scheme (WLS) – The Railways has allowed investments in Special Purpose Wagons (SPW) and High Capacity Wagons (HCW) by manufacturers and consumers of goods and their leasing by leasing companies from 2008. To make these schemes more popular, the Ministry of Railways revised the eligibility criteria in February 2011 by reducing the minimum net worth requirement for wagon leasing companies. The new norms also allowed for the leasing of wagons under the Automobile Freight Train Operators Scheme, Special Freight Train Operators Scheme and Container Train Operators Scheme. By 2012-13, two companies had registered as Wagon Leasing Companies.

Turning around the cash strapped Indian railways is a herculean task. A lot of investment, research and time are required to put it back on track. Though the present government in its election manifesto spoke a lot about improving the railways infrastructure and have placed a qualified and experienced minister at the helm of affairs. However, it can be safely concluded that their efforts will bear fruits when the changes promised are implemented meticulously.

 

Road Development based on tolls : Do we have better options?

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Ravi Padmaraj, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur


On 12/2/2014 The Hindu reported that the Union transport ministry has decided to remove tolls from 125 roads .A welcome move indeed.Privatization of road development using tolls has been a controversial topic sometime back.But slowly , like everything  , people had started forgetting that they were being forced to pay for exercising one of their basic rights – Freedom of movement.But then, like all decisions , there are two sides to this argument. With urban infrastructure an important factor in the future development of the country and government already under a huge amount of debt, few other options were left but to depend on the private companies for an efficient road network. But the problem was  more or less with the tendency of these private companies to exploit the situation. Instead of having an agreement to stop the toll collection when they get a decided amount of profit , they push for years long blanket contracts without mentioning a word about the exponential increase in traffic every year.Almost all toll contracts in India are made based on the amount of road traffic that was there when the road was built. If an audit was done to assess the amount of money made by private companies from toll plazas , most of them would be found running well above their decided profit margins.

Now that we have experienced the boon and bane of privatized infrastructure development , what would be a solution to the problem ? Some states like Kerala had gone overboard and refused further road development proposals based on toll system citing people protest. Considering the fact that Kerala roads have been an favorite testing ground for off road vehicle manufacturers (yes i am a frustrated keralite) , the sustainability of such a decision in the long term is doubtful. A middle ground would be to allow tolls, but to decide on the charges and the  duration based on more scientific forecasts and reasonable assumptions. Now that the government has woken up to the issue , let us hope the ministry will refine the existent toll system based on more reasonable and accurate forecasts.

References
http://www.thehindu.com/news/national/125-toll-plazas-will-be-scraped-by-monthend-gadkari/article6886524.ece