Clearing a significant hurdle in Unitech Wireless's way, the Foreign Investment Promotion Board (FIPB) has approved the proposal of Norwegian company Telenor to increase its shareholding in the former from 49 per cent to 67.25 per cent. The joint venture cannot, however, hire any staff member who has previously worked in Telenor Pakistan. The move brings major relief for the company as the FIPB had deferred the decision last month, setting off alarm bells.
This is not the only policy uncertainty Unitech Wireless has run into in the past month. The Department of Telecommunications was previously mulling over imposing a three-year lock-in clause on stake sales by the owners of telecom companies that were granted telecom licences in 2008. The move was aimed at preventing the promoters of these companies from making windfall gains by selling stakes to foreign companies. However, the verdict is now in. It has been decided that the lock-in clause will be put in place but will not apply to the agreements already entered into by companies such as Etisalat DB Telecom and Unitech Wireless.
The road is now clear for Unitech Wireless to roll out services as intended.
Background
With no prior experience in telecom, Unitech entered the industry in February 2008 after acquiring a unified access service licence and spectrum for 22 telecom circles. However, the new venture soon ran into trouble as the financial crisis began impacting the group's mainstay, the real estate business.
Subsequently, in an attempt to raise funds, Unitech signed an agreement to sell 60 per cent stake in Unitech Wireless to Norway-based telecom service provider Telenor for $1.2 billion. Following this, in March 2009, Unitech decided to place an additional 7.25 per cent stake with Telenor in return for which Telenor will undertake a larger repayment of debt.
Rollout plans
Late in rolling out services by several months, the Norwegian-Indian joint venture is now hoping to hit the market by the third quarter of the current fiscal year. It has firmed up its rollout plans and intends to extend services across the country, starting with Tamil Nadu, Karnataka, Andhra Pradesh and Kerala, over the next three years. The company, which has allocated Rs 100 billion as capital expenditure, plans to more than triple its workforce to 1,800 people during the current fiscal year.
To raise funds, Unitech Wireless will approach banks and FIs. The company reportedly expects to obtain project funds of $1.5-$2 billion by next year.
The service provider has also acquired national long distance (NLD) and international long distance (ILD) licences. This will help it to save on carriage expenses, thus providing it with an edge over competitors. Also, with these licences, Unitech Wireless has the potential to become a truly diversified, end-toend telecom services provider like Bharti Airtel and Reliance Communications.
Contracts awarded
To minimise its capital and operating expenditure, the company has entered into tie-ups with vendors and technology providers. In June 2009, it awarded a fiveyear, $400 million contract to Huawei Technologies for deploying an end-to-end telecom network in Karnataka, Tamil Nadu and Andhra Pradesh.
In the same month, it awarded a five-year, $50 million contract to US-based Telcordia for supplying prepaid mobile charging solutions across its GSM network. The system will act as a meter for prepaid users and allow them to check their balance in real time.
The operator has also placed five-year equipment orders with Ericsson and Alcatel-Lucent for $500 million and $150 million respectively. Ericsson will supply and manage all of Unitech Wireless's network equipment in Bihar, Uttar Pradesh (East) and Uttar Pradesh (West). AlcatelLucent will build the telecom network and offer a range of services including project management, network design, integration, testing and installation. It will also deploy and maintain its multi-standard GSM/ EDGE radio access solution.
To outsource its IT infrastructure, Unitech Wireless has awarded Wipro a nine-year multi-purpose contract for an undisclosed amount. The deal is speculated to be in the Rs 25-Rs 30 billion range, and is considered amongst the largest domestic IT contracts awarded so far.
Earlier in February 2009, Unitech Wireless finalised a 20-year infrastructure sharing agreement with Wireless-TT Infoservices, the tower arm of Tata Teleservices and Quippo Telecom Infrastructure, to lease tower and transmission infrastructure.
Challenges
Though Unitech Wireless has made significant progress, there is still much more to be done. While it has arranged for towers and equipment, its marketing and distribution set-up is reportedly still not in place.
According to Dr Mahesh Uppal, director, ComFirst, "The biggest challenge for the service provider is still ahead – customer acquisition. How does a new operator get customers since the latter is already with its competitors and those that are left have an ARPU of less than Rs 100?"
All in all, Unitech Wireless is looking at busy times ahead. The company needs to cover a lot of ground to achieve its target of launching services in 2009. That said, it is still ahead of the new licensees. Datacom is embroiled in a promoterrelated issue, Etisalat DB Telecom is in a political controversy, S Tel is still a long away from launching services, and Bycell is awaiting FIPB approval.
Uppal points out, "The main advantage with Unitech is that its partner, Telenor, is already present in Bangladesh and Pakistan. It has a strong experience in the South Asian markets." It is now up to Unitech to build on its lead.