14 thoughts on “In India, mega billion dollar mobile buyout frenzy”

  1. The New York Times brings3 up the growth in emerging markets argument, and trot out the “less than 10% of the 1.1 billion people in India have a mobile phone”

    I think thats good news! There’s plenty of room to grow (assuming ~90% still need mobile phones).

  2. Hold your horses, exuberant investors!

    India is a big market, and growing at ~5-6 million users per month, and will probably do so for several months, maybe a couple of years as well..

    BUT, the key point is ARPU. Avg revenue translates directly from purchasing power. What most people in the Western world do NOT realize is that the avg consumer does NOT want to spend ~$40-50 per month on her mobile bill! They can’t. They just don’t earn enough to justify that spending. ARPU will remain less than 50% of western world, and the phones will be less expensive (barring outliers, of course).

    Indian mobile market is a volume game, and a low-cost provider game, largely speaking. The more bang for the network-buck a service provider can get, the more successful it will be.

    And no, I don’t think it will ever reach 90% penetration any time soon in India.

    So, yes, be happy about the bubbling cauldron, but hold your horses!

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  4. India is the world’s fastest growing mobile market.

    India is all set to overtake Russia as the country with the third highest mobile phone subscribers across the globe by early 2007 — behind only China and US.

    The GSM subscriber base hit the magic 100 million mark in November — making India the third highest GSM country after China and Russia. However with 36 million CDMA subscribers in November the overall mobile base in the country has hit a staggering 136 million.

    IN comparison Russia had 152 million mobile subscribers in November-a gap of only 16 million with India.


  5. I kind of disagree that ARPU is not 40USD per month. If we check the price plan for all different wireless service provider, you would notice that each mobile user is giving around 2000Rs per month for there subscription.

    Now if we equate it to USD then it would be around 40 USD.

    But I do agree that 100% of Indian population don’t want to buy mobile phone. This is true for any country in the world.

  6. With the re-launch of Kon Banega Crorepati (Indian version of Who wants to be a millionaire?) next month, businesses are playing their high stake version.
    As a very successful investor told me recently – the “problem” with the world today is that there is too much money in the system. He expected this trend to continue over the next 3-5 years. As long as this “problem” is alive – we will see investors overy paying for most assets

    IMHO, it is going to take another 10-15 years for India to reach 500m wireless subs – ARPU will increase by no more than 10% per year.

    BTW, most operators in India over-estimate the number of subs by 7%-10%.

  7. I feel that this is an egomanical move by Atul Sarin, the CEO of Vodafone. Vodafone is creating disproptionate valuation for its vested interest. They should rather focus on thier 10% investment in Bharti, which also has been a disasterous move.

  8. Current penetration as an indicator of growth: Good line of thinking, usually, but if you have travelled in the vast tracts of India, you will know that mobile coverage is patchy just like in the vast French countryside and the American hinterlands. So when you say growth, do you mean growth that just comes from pushing a few subscribers to spend more in a few metropolitan centres where coverage is good, or do you mean growth that comes from investing in infrastructure to enable more people to communicate, considering getting a fixed line connection in India is still a nightmare, a slow one? In that respect it is better for MNOs to focus on being THE communication network of choice for those who still don’t have fixed lines. That makes the comparison a bit like Africa, and a lot less like Italy or wherever.

    ARPU of $40-50: Somebody here makes an argument about Rs2000 being about $40. Fine, if you just use Rs45 is about $1 but not fine at all, if you consider purchasing power parity. Many people in AB and B towns cannot spend that much as an individual’s communication spend. Man can not live by bread alone, but hey man DOES need that bread before he thinks of getting a mobile!

    Growth because penetration is only 10%: Good argument once again – and in theory feasible, for instance, the UK has nearly 95% penetration and MNOs are under fire for extortionate roaming prices but I digress – but of the 90% one has to see how many can afford to buy mobiles and pay the ongoing ‘recharge’ prices. Remember Marketing 101, guys? Demand is need backed by purchasing power. Just because 90% of the populace does not have mobiles does not mean they need it or can afford to pay for it. Or is this too old-fashioned to mention in the midst of multi-billion dollar bid wars?

    The growth in the Indian mobile market will be a slow-burn business. It is worth seeing how many bidders will stay in the game betting on that sort of horse chugging rather than galloping along, especially when those bidders are under fire from London City analysts on a quarterly basis.

  9. Ka-shing feels entitled to his wealth

    The bidding war over Hutchison Essar shows symptoms of turning into a slug-fest. Bidders for Indian mobile operator Hutchison Essar jostled for position on Thursday as analysts urged main shareholder Hutchison Telecom to set a high price on any exit from India’s vibrant telecoms sector.

    In the latest twist to a $17 billion takeover tussle, Hutchison Essar’s 33 percent Indian shareholder, Essar group, has approached one potential bidder, Britain’s Vodafone Group Plc (VOD.L), about a carve-up deal, one press report said.

    Ka-shing says, “ I do not want to sell my stake to the Ruias. They are brown skins. I would rather sell to Vodafone or Verizon. I worship the white man. That is why people in Hong Kong call me Superman. I would like to thank the brown skinned employees of Hutch. Thanks to their blood and sweat I am entitled to billions of dollars. If I want a million dollars on the table in front of me all I have to do is scratchy my balls. Hutch’s brown skinned employees in India do huge amounts of unpaid overtime. Thankfully in India you can exploit workers and make them work beyond their proper hours. Hutch’s brown skin employees do an average of seventeen hours and six minutes extra work a week. This is all unpaid pf course. Thanks to this I am entitled to 20 billion dollars.

    “I am just sitting at home and enjoying the fun. All these suitors are lining up like losers. The culture of free labour by our employees is taken for granted by telecom promoters like me. Employees must carry on working with no thought of compensating them for the
    extra hours they put in. Meanwhile I am sitting at home and focusing on my afternoon sleep from 1:30 pm to 4:30 pm after a six course gourmet meal. Being a telecom promoter is rosy as long hours have become part of the culture for our employees. We just have to sit back and enjoy the fruits of labour that our employees have put in. Far too many Hutch employees are denied proper breaks through pressure of workloads.

    “They have to accept it as par for the course, but as their lives develop and they begin to have family obligations this erosion of work/life balance can have damaging consequences for their home life. I am not bothered. I will sit at home with billions that I have
    not worked for and enjoy the comforts of life once the buyout happens. I am entitled to it. I cannot tell you how much I have depended on the goodwill and unpaid extra work, loyalty and professionalism of Hutch’s staff to get 20 billion dollars.

    “Telecom promoters like me, Mittal do their best to undermine the pension rights of tens of thousands of staff. We have a take it or leave it stance as far as our employees are concerned. I calmly ignore the fact that Hutch’s employees blood and sweat has created huge
    brand equity for Hutch. I did absolutely nothing in that regard. why should I? I am a telecom promoter and a Chink.

    “The economic situation of Hutch’s employees will become precarious after the buyout. Each year Hutch’s loyal hard-working staff were offered a below inflation pay rise. Hutch’s staff are very worried about their futures. They might lose their jobs in a
    consolidation move. All their hard work has only benefitted me. Hutch’s employees are poor relations in an industry that already pays its staffers badly. The way telecom promoters treat their employees is
    despicable. These are highly skilled badly underpaid people that the telecom industry relies upon heavily and is hugely indebted to. If I want a million dollars on the table all I have to do is scratch my balls. If hey want a million dollars it is just a dream.

    “Telecom promoters like me, Mittal indulge in cynical exploitation. There is a two-tier force in telecom. Hutch’s employees are paid a second-class rate for doing a top-class job. Telecom promoters are a group of greedy employers who want to deprive badly paid workers of a proper five-figure salary. I like to publicly insult my employees like this.”

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