Of late, I have been in conversation with my colleagues regarding the present and future of the Indian telecom industry. Here is an excerpt from our day-to-day discussion. If you find it logical, please let us know too. If you think that we are engrossly wrong in the way we are reading the market, we need to hear from you even more. Your comments are most welcome.
Question: How do you perceive the contemporary telecom industry in India?
Kausar Fahim: From the perspective of the Indian economy, it has been an industry of paramount importance, as it helps the economy grow. Almost all industries depend on the telecom sector, for strategic and operational reasons. But, from the perspective of the telecom industry, I think that the telecom industry has matured a lot, although there is an acute need for improving the quality of the services. Looking at the kinds of strategic games that are being played, such as stiff price-war while the market penetration rate is just 30% and the ARPU is just INR 100+, I am very, very dubious of the profitability of the sector itself, and especially of the new entrants. In other words, if I were a new entrant, I would not enter into the Indian telecom industry now. I would rather wait and watch for the market consolidation to happen. In Economics term, I would rather wait for the market to be either Cournot Oligopoly or Stackelberg Oligopoly, but definitely not Bertrand Oligopoly.
Question: In which stage is the Indian telecom industry?
Kausar Fahim: I think it has matured enough to play strategic games, with dire consequences. It has become capable of erecting barriers for new entrants. Not many entry barriers are there, as the government is extreme care of not having a monopolisitc market in any of the circles. In an Economics term, I would say the telecom market is Bertrand Oligopoly, with a "beggar-thy-neighbour" policy. It is definitely good for customers, as they are getting products and services for cheap, but, then, they won't get quality services, as the bottom-lines of the players are heading southward.
Question: Why do you think the quality of services is poor, or is not up to the mark? What could resolve the issue?
Kausar Fahim: Look at the call-drop rates. Even in metropolises, such as New Delhi and Bangalore, the quality of the network connectivity is poor. Much worse are the conditions in the smaller cities! I think 3G could solve most of these kinds of issues, as the majority of the problems is of insufficient spectrum.
Question: Why is the 3G spectrum not yet there?
Riyaz Ahmad Khan: 3G has been procrastinated by the Indian government because of several reasons:
1. The Indian Defence is still occupying most of the 3G spectrum, and has to migrate to some other band of spectrum. In order to migrate to some other spectrum, they have to change their equipment -- which takes time and involves budgetary issues.
2. The Indian government did a lot of study not to leave any stone unturned in order to squeeze the maximum cash out of the sales of spectrum and licenses. A special team was sent to the US to study the pricing of the 3G spectrum. A delay could be part of the pricing strategy, wherein, you let accumulate as many buyers as possbile, with as much appetite and desperateness as possible.
3. There has been a lobby working with the Indian government that has been influencing the government not to auction the 3G spectrum anytime soon, as they want to reap maximum benefits out of their 2G-related investments. Moreover, they are also not ready for capitalizing the 3G spectrum. This is also in the interests of the government, as the 3G spectrum is going to be auctioned, and you always want as many bidders as possible for any auction.
4. The Indian government do not intend to repeat the mistakes it made at the time of the auction of the 2G spectrum. The government intends to auction the new spectrum on a profit-sharing basis, obviously along with the downpayment by the higgest bidder.
5. The whole process of the 3G auction also got delayed because of the change in government at the centre -- from the BJP-led government to the Congress-led government.
6. New operators also want a delay as they are busy setting their operations up.
7. For long, telecoms operators had contemplated on which way to go further: Wimax or 3G. This added further delay to the auction process.
Question: How do you see the Indian telecoms industry in the future?
Kausar Fahim: As we all know, India is a country of poor people! 25% of the resident Indians are below the Indian-standard of the poverty line! And, amongst the rest, a majority just earn enough to support a living somehow! And, every telco knows that it cannot sell value-added-services (VAS) to poor people, with a high profit margin. If it HAS to sell value-added-services to poor people, somehow, or anyhow, the solutions lie in very low prices that might trigger another spree of a price war amongst the telcos that undoubtedly will rob them of their high-margin businesses, hitting their bottom-lines the most.
Secondly, companies grow with the economy. No company can grow at a faster pace than the economy in which it operates for indefinite period of time, otherwise the company will engulf the economy! India is growing at 6% per annum. Even if we assume that the telecom industry will outpace this growth for some more years, but, then, the growth in the sector is already being shared by many hands! What would be the net-profit share of each company in this kind of Bertrand Oligopoly? What would be the implications of all these in the short-term, medium-term, and long-term? Dubious?
Thirdly, telcos are busy acquiring customers at the cost of their net profits -- and this makes business sense to some extent, especially when this is the max they can do. The big players want to earn as many customers as possible, even if it means low net profits. Going forward, they know that there are two sources of prime growth:
1) by selling VAS to relatively well-off people who are ready to consume VAS. For this telcos need 3G, the fate of which is still not decided. It is apparent that big, ready players have to bleed for some more time.
2) by capturing the fragmented rural markets and poor people in urban areas to primarily raise their ARPM (Avergae Revenue Per Minute), and, if possible at all, then also raise their ARPU. A price war might increase the market share and revenues to some extent, but it certainly negatively impacts the bottom-line, which is the ultimate objective of fighting any war.
Thus, my concern is that what is the guarantee that a price war will not happen for selling VAS once the 3G spectrum is in place? Consequently, what would the impact be on the ARPU, ARPM, ROI, ROTA, ROCE, etc.?
In short, I am bearish about the Indian telecom industry in the short-to medium term. If Mergers and Acquisitions (M&A) happen in the industry, there could be substantial growth, going forward thereafter, otherwise the industry will grow, with the economy, at a rate of 8 percent to 10 percent Y-o-Y -- which would be a mediocre performace as per the industry expectations. The rationale behind this is the portion of the disposable income of the masses that is spent on telecoms products and services. Moreover, there is a plethora of VoIP-based telephony services that pose a big threat to the industry's revenues.
Riyaz Ahmad Khan: I am bullish about the Indian telecom industry because the mobile phone is something that we are always carrying while we are awake! It is unlike most of the other products that we use just for a couple of minutes everyday. The other important factors are the sheer population of India, and the untapped potential lying therein. With just 30 percent penetration rate, the telecom industry has a long way to go forward.
Tuesday, November 3, 2009
Saturday, September 12, 2009
The Bounce-back of the Capitalistic World
On September 11, 2001, the Dow was at 9605. On March 09, 2009, the Dow was at the 12-year low of 6440. And, yesterday – on September 11, 2009 – the Dow, once again, closed at 9605.
The inference is quite easily fathomable! Isn’t it? While, between 1997 and 2001, it took the Dow to reach 9605 in four years, this year, in 2009, the journey of those four years has been covered in just flat six months! Impressive! Indeed!
This has technically been so because of the high “base-effect,” and, in other words, what I satirically call, “the spring effect of a capitalistic world” – the harder it falls, the faster it bounces back.
So, what lies ahead, from here? Well, if you are a long-tern player, go long – your investments will be in the safe hands of the capitalistic markets. But, if you love to ride the tides of intra-day-and inter-day movements, keep watching for market indicators, right from the far East to the far West – you too will enjoy your journey on the “tides.”
So, what’s the moral of the story? Irrespective of who you are, you are almost “insured” to book profits, just keep buying on the dips! The "game" is just half-way through! You can catch up! Trust me. You can, provided you identify the dips. :-)
Friday, August 28, 2009
Reclaiming the Lost Grounds
For the past one week, the bourses worldwide, having surged more than 30 percent since March 09, 2009, have been struggling to hold on to their recently gained grounds. So far, it seems that the bourses worldwide are all poised to take off in a big way.
Be it the DJIA, the NASDAQ, the FTSE 100, the DAX 30, the CAC 40, the Nikkei 225, the Hang Seng, the Shanghai Composite, the Tel Aviv 100, the NSE 50, the BSE 30, all have surged like anything by more than 30 percent on the hope that the world’s economy is recovering from the Great Recession, and is bound to reap big returns in the near-term-to medium-term future.
Well, I have no doubt about this, as after every recession, the capitalist world strikes back even more vigorously than the pre-recession one to retain its lost grounds as quickly as possible. That’s the precise reason why the bourses have been running quite ahead of the market fundamentals. It’s not a wrong thing, as the bourses are meant for getting a hold on the future earnings at the least possible costs.
So, will the NSE 50 cross its 4730 barrier in the next couple of sessions, and will it cross 4850 in the next couple of weeks? I bet; it will. Just watch out! Go long.
Making Progress
What do you mean by making progress? And, how do you measure it? How do you measure qualitative progress, and, then, how do you interpret the quantitative measurement? Could you prorate your so far progress to assure yourself that you would be growing indefinitely at the same rate? If yes, then what are the assumptions that you are making, and are your assumptions justifiable? If no, then what are the impediments that you foresee, and how would you overcome them?
What is a neat rate of progress? How do you define neat, and on what bases? Well, I think I can help you out in aligning your weighted-matrix for the estimation of your progress. But, you need to benchmark your accomplishments on your own!
Should you need any further brainstorming related to your “making progress,” please feel free to get back to me. I would love to share my quantitative model for reasonably quantifying the progress made, both qualitative and quantitative.
Finally, no point for guessing the source of the caption! :-)
What is a neat rate of progress? How do you define neat, and on what bases? Well, I think I can help you out in aligning your weighted-matrix for the estimation of your progress. But, you need to benchmark your accomplishments on your own!
Should you need any further brainstorming related to your “making progress,” please feel free to get back to me. I would love to share my quantitative model for reasonably quantifying the progress made, both qualitative and quantitative.
Finally, no point for guessing the source of the caption! :-)
Friday, July 10, 2009
The Over-reaction of the Indian Stock Markets
First of all, how is the new budget, as proposed by the newly elected Indian government?
To me, the budget looks good, if not excellent. It has an inclusive approach to the future growth of the Indian economy, keeping in mind the current Great Recession. The government has rightly decided to expand the depth and breadth of future expansion of the economy by:
1) Enhancing the disposable income of the masses by increasing the tax-exemption slabs. This will leave the people, with relatively a little more money to spend, keeping in mind the current inflation.
2) Trying to bring the poor of the country to the mainstream of consumer-base, especially farmers, as they contribute 28 percent to the Indian GDP. That’s the reason for extending support to this segment in this new budget.
3) Revoking and reforming some specific taxes, such as the Fringe Benefits Tax, the Commodities Transaction tax, the Minimum Alternative tax. Doing so ensures that the entities concerned are not taxed twice, and the entities are taxed righteously, without giving them a big window to evade taxes (remember Reliance until a couple of years back).
4) Increasing the government spending on the National Rural Employment Guarantee Act, the Food Security Act, and the National Rural Health Mission. All these are intended to take care of the neglected, down-trodden, poor masses, who all can contribute to the future growth of the economy, which is currently at USD 1.3 trillion.
5) Not selling much stake in the coveted Public Sector Units off to cover a large portion of the fiscal deficit immediately. I think the government has taken the right decision for NOT giving a knee-jerk-reaction type of solution to reduce the proposed fiscal deficit of 6.8 percent of the GDP. Instead, the budget is looking forward to borrowing USD 93 billion to fund the budget spending on the roads, power, and aid to the poor. The dilapidated state of infrastructure robs the country of almost 2 percent of growth to the real GDP!
In other words, the budget looks like a good one, with long-term-growth prospects, as it takes an inclusive approach that takes care of all strata concerned, at least to some extent, for sure.
Then, why did the stock markets over-reacted post budget? Well, the answers lie in the recent past of the stock markets!
Having been deep fried recently on the Indian bourses because of the of-late global massacre on the stock exchanges worldwide, the investors were expecting a quick, irrational, selfish growth, which is against the basics of the market fundamentals and Economics, to offset their recent past losses. The budget doesn’t have anything to fulfill that kind of right-off-the-roof growth. So, simply out of despair and to beat the FIIs in going for a selling spree, the domestic institutional investors over-reacted by mass selling of equities. The result of which has been that the bourses shed more than 1000 points, within a couple of days.
A piece of honest advice to retail investors is that look for economic indicators, for financial statements of the companies that you are interested to invest in, for buying at the dips, and for staying invested for as long as possible. You are guaranteed to make good profits.
And, finally, a piece of advice to speculators is that visit the Church more often! You never know when you have no other choice, but to lie in the backyard of the Church peacefully! After all, everyday is not a Sunday.
To me, the budget looks good, if not excellent. It has an inclusive approach to the future growth of the Indian economy, keeping in mind the current Great Recession. The government has rightly decided to expand the depth and breadth of future expansion of the economy by:
1) Enhancing the disposable income of the masses by increasing the tax-exemption slabs. This will leave the people, with relatively a little more money to spend, keeping in mind the current inflation.
2) Trying to bring the poor of the country to the mainstream of consumer-base, especially farmers, as they contribute 28 percent to the Indian GDP. That’s the reason for extending support to this segment in this new budget.
3) Revoking and reforming some specific taxes, such as the Fringe Benefits Tax, the Commodities Transaction tax, the Minimum Alternative tax. Doing so ensures that the entities concerned are not taxed twice, and the entities are taxed righteously, without giving them a big window to evade taxes (remember Reliance until a couple of years back).
4) Increasing the government spending on the National Rural Employment Guarantee Act, the Food Security Act, and the National Rural Health Mission. All these are intended to take care of the neglected, down-trodden, poor masses, who all can contribute to the future growth of the economy, which is currently at USD 1.3 trillion.
5) Not selling much stake in the coveted Public Sector Units off to cover a large portion of the fiscal deficit immediately. I think the government has taken the right decision for NOT giving a knee-jerk-reaction type of solution to reduce the proposed fiscal deficit of 6.8 percent of the GDP. Instead, the budget is looking forward to borrowing USD 93 billion to fund the budget spending on the roads, power, and aid to the poor. The dilapidated state of infrastructure robs the country of almost 2 percent of growth to the real GDP!
In other words, the budget looks like a good one, with long-term-growth prospects, as it takes an inclusive approach that takes care of all strata concerned, at least to some extent, for sure.
Then, why did the stock markets over-reacted post budget? Well, the answers lie in the recent past of the stock markets!
Having been deep fried recently on the Indian bourses because of the of-late global massacre on the stock exchanges worldwide, the investors were expecting a quick, irrational, selfish growth, which is against the basics of the market fundamentals and Economics, to offset their recent past losses. The budget doesn’t have anything to fulfill that kind of right-off-the-roof growth. So, simply out of despair and to beat the FIIs in going for a selling spree, the domestic institutional investors over-reacted by mass selling of equities. The result of which has been that the bourses shed more than 1000 points, within a couple of days.
A piece of honest advice to retail investors is that look for economic indicators, for financial statements of the companies that you are interested to invest in, for buying at the dips, and for staying invested for as long as possible. You are guaranteed to make good profits.
And, finally, a piece of advice to speculators is that visit the Church more often! You never know when you have no other choice, but to lie in the backyard of the Church peacefully! After all, everyday is not a Sunday.
Sunday, June 21, 2009
Either Way It's Gonna Rain In India
Agricultural sector contributes around 28 percent to India's GDP, and more than 70 percent resident Indians still live in the rural areas of India. The correlation is that those 70 percent are dependent on agriculture-related products and services. And, if it doesn't rain there on time, the chances are highly likely that it's gonna rain on the Indian bourses, stripping the bourses of their sheen for a couple of quarters, at the max -- yes, at the max! Why?
Poor monsoon leads to poor agricultural products and services for the year, leading to poorer, or lesser, incomes for the populations in those rural areas, reducing the demands for the commodities that those poor people feed on. Thus, the economy relatively slows down, and investors find it relatively very hard to send "greenshoots" on the Indian market, crippling their abilities, and/or capabilities, to play speculative games through which they "cohort-ly" "rig" the bourses to make obscene amount of money.
So, watch out for the "Indian" sky, or call the Meteorological department of India, before you invest on the Indian bourses! Since it has already been "raining" all over the world, and if it even rains on the Indian bourses, you might not have any place left to hide your "speculatively" earned stack of cash! Am I right -- dear FIIs?
Saturday, June 20, 2009
Retrospect
I was thinking how weird we all have become. How fragile things are getting in life. How we unavoidably lose a lot, when we strive to earn just a little more. How far should, or could, or must, we go to get things we want, or need, the most? And, how would, or could, or should, we justify all our sincere efforts? Things do backfire! Don't they?
Life is indeed a rollercoaster ride! We enjoy it, when we are at the top. But, how should we take it, when we are at the bottom? Should we expect something to cling on? What if, when we don't have any? We are just human! Ain't we? Human!
At times, we just get scared of growing up further. You never know what is awaiting you next! Knowing all this, would you still prefer living the rest of your life forward, or would you prefer living it backward -- provided that you can make that kind of choice only once? Weird? Retrospect! That might solve a lot of issues!
As far as I am concerned, I want to make more mistakes in the future!
Life is indeed a rollercoaster ride! We enjoy it, when we are at the top. But, how should we take it, when we are at the bottom? Should we expect something to cling on? What if, when we don't have any? We are just human! Ain't we? Human!
At times, we just get scared of growing up further. You never know what is awaiting you next! Knowing all this, would you still prefer living the rest of your life forward, or would you prefer living it backward -- provided that you can make that kind of choice only once? Weird? Retrospect! That might solve a lot of issues!
As far as I am concerned, I want to make more mistakes in the future!
Friday, June 19, 2009
Bangalore or Buffalo?
I would like to share with you some newly "coined" governments' statements, and some new findings in the international-politics-cum-international-business. These are some power-pact excerpts from the Times of India.
Pitching for increased economic ties between India and the America, US Secretary of State Hillary Clinton has called for "advanced" linkages, similar to the existing ones, between "Manhattan and Mumbai," or between "Boston and Bangalore."
Unveiling new proposed tax reforms, Obama had said, "It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."
Terming the blooming partnerships between the two countries as "exciting", Clinton asserted that India's growing economic prowess is recognised the way, the law of gravity is accepted by people.
"We need bilateral cooperation between our governments to catch up with our people-to-people and economic ties," asserted Clinton.
"People know what kind of business and investment opportunities are there in India. According to Clinton, the America views India as one of the few partners worldwide who would help the country in shaping the "21st century."
The reason is as simple as anything! The trade between India and the US is worth over USD 43 billion and has more than doubled since 2004. Moreover, a study has found that corporate India created employment for 300,000 people in the US between 2004 and 2007. An India Brand Equity Foundation study release mentioned that the Indian industry contributed USD 105 billion to the US economy during 2004-07.
So, Bangalore or Buffalo? Is it gonna matter, anymore?
Pitching for increased economic ties between India and the America, US Secretary of State Hillary Clinton has called for "advanced" linkages, similar to the existing ones, between "Manhattan and Mumbai," or between "Boston and Bangalore."
Unveiling new proposed tax reforms, Obama had said, "It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."
Terming the blooming partnerships between the two countries as "exciting", Clinton asserted that India's growing economic prowess is recognised the way, the law of gravity is accepted by people.
"We need bilateral cooperation between our governments to catch up with our people-to-people and economic ties," asserted Clinton.
"People know what kind of business and investment opportunities are there in India. According to Clinton, the America views India as one of the few partners worldwide who would help the country in shaping the "21st century."
The reason is as simple as anything! The trade between India and the US is worth over USD 43 billion and has more than doubled since 2004. Moreover, a study has found that corporate India created employment for 300,000 people in the US between 2004 and 2007. An India Brand Equity Foundation study release mentioned that the Indian industry contributed USD 105 billion to the US economy during 2004-07.
So, Bangalore or Buffalo? Is it gonna matter, anymore?
Monday, April 27, 2009
Rising Up to The Occasion
Life is a marathon, and we keep running it either relentlessly or reluctantly. We just cannot say no to this race, as it is about life, and we don't have any other choice, but to run it!
To make our life a lovely one, we work so hard that we do anything that is, or seems to be, within our reach. Isn't it? But, while chasing our dreams, do we ponder on the moments that really change our life? Yes, I am talking about those decision-making moments that change our lives, forever!
For example, we study for one full semester, but what decides, or, perhaps, justifies, our efforts is the outcome of those three hours of the strenuous, end-sem exam! True? No, I am not judging whether the system is right or wrong! I am hinting at the challenges of rising up to the occasion. Think.
No matter how well you practice the art of pitching, hitting, and running during net-practice sessions, your success counts only when you pitch, hit, and run well on the day when it counts!
So, keep preparing, but do perform to produce results, when it is required, otherwise what is the point in preparing at all? Got it! I know you did! Liar! :-)
To make our life a lovely one, we work so hard that we do anything that is, or seems to be, within our reach. Isn't it? But, while chasing our dreams, do we ponder on the moments that really change our life? Yes, I am talking about those decision-making moments that change our lives, forever!
For example, we study for one full semester, but what decides, or, perhaps, justifies, our efforts is the outcome of those three hours of the strenuous, end-sem exam! True? No, I am not judging whether the system is right or wrong! I am hinting at the challenges of rising up to the occasion. Think.
No matter how well you practice the art of pitching, hitting, and running during net-practice sessions, your success counts only when you pitch, hit, and run well on the day when it counts!
So, keep preparing, but do perform to produce results, when it is required, otherwise what is the point in preparing at all? Got it! I know you did! Liar! :-)
Saturday, April 25, 2009
Love Thyself
It is not at all bad to be selfish, but we should just take care that we do not harm anyone by being selfish. Does it sound counter-intuitive? It doesn’t. You need to think, and devise your own means for doing so. It is not so hard.
We should love ourselves. Only then we can love others. Give thyself undivided attention, and talk to your inner-self. Just do whatever makes you extremely comfortable with thyself. It teaches you a lot. It will tell you what it wants, and what it needs.
How can we do so? Pamper thyself! Treat thyself like a king! Date thyself! Talk to thyself! Know thyself! Love thyself! The rest will fall in place!
And, never even try to please everyone! Even God could not do so!
Jesus! I have my semester exam after just 5 weeks, have to study more than 600 pages, and, here, I am busy loving myself! I think I should get back to studies! It is high time I do so. After all, I have a reputation to maintain! This blogging business is so, so addictive! But, above all, I am just a mere human being, so I need to talk. What else is a better way of talking your heart out than this blogging thing? At least, it doesn’t scream at you!
We should love ourselves. Only then we can love others. Give thyself undivided attention, and talk to your inner-self. Just do whatever makes you extremely comfortable with thyself. It teaches you a lot. It will tell you what it wants, and what it needs.
How can we do so? Pamper thyself! Treat thyself like a king! Date thyself! Talk to thyself! Know thyself! Love thyself! The rest will fall in place!
And, never even try to please everyone! Even God could not do so!
Jesus! I have my semester exam after just 5 weeks, have to study more than 600 pages, and, here, I am busy loving myself! I think I should get back to studies! It is high time I do so. After all, I have a reputation to maintain! This blogging business is so, so addictive! But, above all, I am just a mere human being, so I need to talk. What else is a better way of talking your heart out than this blogging thing? At least, it doesn’t scream at you!
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