Aircel Ltd, the Indian mobile phone operator controlled by Malaysia’s Maxis Communications Bhd, will not bid for 2G spectrum in an auction that is scheduled to be concluded by 31 August, following a Supreme Court directive.
“We have got enough spectrum,” said Sandip Das, a director on the Aircel board and chief executive of Maxis Communications, which owns 74% of Aircel. Das is currently overseeing the operations of the Indian unit till a CEO is named.
Many Indian operators with 3G spectrum are using it to decongest their networks and use the spectrum to augment their 2G network, Das said. “In our case, the 2G spectrum is not fully utilized and, therefore, we don’t have that spillover in most areas,” he said.
Aircel, however, has filed a petition in a telecom tribunal for allotment of an additional 1.8MHz to increase its spectrum in most parts of the country to 6.2MHz, as it’s contractually eligible to get, from the start-up 4.4MHz that the company was given in 2008. Aircel doesn’t expect the one-time fee for the additional spectrum to be high, Das said.
Aircel, which has spent $4.5-5 billion on network infrastructure in the past four years, has about 65 million subscribers, accounting for 9.48% of Indian mobile phone users, and a 4.6% revenue market share. The company is currently building its 3G network in 13 licensing areas where it won spectrum, and broadband wireless access (BWA) network in eight circles and expects to spend around Rs. 7,500 crore on it during the current fiscal. Parent Maxis has already spent Rs. 45,000 crore in India. Aircel doesn’t plan to sell shares to the public in the near future, Das said.
“The equity in this company is well above $3.5 billion and there’s an over-riding debt on top of that,” Das said.
The company expects demand for wireless data to surge. “We saw that 60% of the country is going to be under 25 and there is going to be a huge data demand and so we coined this expression of pocket Internet. We grew meteorically and I think in 2010, we were the fastest-growing telco,” Das said. “We want to be a great data services provider.”
The company also plans to bundle handsets with certain tariff plans to leverage its expertise in the area. “We will play in that area or, at least, facilitate in that area depending on how the economics go. That’s a very important area as you can have the best data network in the world but you can’t do anything about the device in the hands of people,” Das said. Aircel is unlikely to completely subsidize the handsets that it sells to customers. “The device subsidy model is a bit hard in India. It will have to be a part-subsidy, part-payment model,” Das said.
Das denied an 11 July The Economic Times report that said Maxis may sell its stake in Aircel to Russia’s Sistema JSFC. “For the last four years everybody has been trying to sell us off,” he said.
“We have got a lot of investment bankers in the country who want to create a lot of mergers and marriages. Everybody is always evaluating what the enterprise value of the company is because so much investment has gone into the country,” Das said. “This company has been one of the biggest foreign direct investors in the country, some $8 billion, including $3 billion on 3G and BWA, including capex, which shows serious intent to stay in this country. Everybody is talking to bankers but there are larger issues of greater concern.”
“Bankers are talking to operators and not operators talking to bankers. It’s the job of a banker. Every company talks to the bankers and for several reasons, in order to get an idea of the environment. Unless somebody starts doing due diligence and transacting money, there is nothing,” he said.
Das, however, did not rule out an exit from the country in the future, depending on the valuation he gets.
“Once the regulatory environment gets clearer, then a number of questions will be raised as to their (Aircel’s) business case in India. It doesn’t make sense for them to participate in the auction given that they have so much of spectrum and far lesser utilization as compared to any other operators,” a Mumbai-based brokerage analyst working with a multinational investment banking firm said on condition of anonymity.
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“We have got enough spectrum,” said Sandip Das, a director on the Aircel board and chief executive of Maxis Communications, which owns 74% of Aircel. Das is currently overseeing the operations of the Indian unit till a CEO is named.
Many Indian operators with 3G spectrum are using it to decongest their networks and use the spectrum to augment their 2G network, Das said. “In our case, the 2G spectrum is not fully utilized and, therefore, we don’t have that spillover in most areas,” he said.
Aircel, however, has filed a petition in a telecom tribunal for allotment of an additional 1.8MHz to increase its spectrum in most parts of the country to 6.2MHz, as it’s contractually eligible to get, from the start-up 4.4MHz that the company was given in 2008. Aircel doesn’t expect the one-time fee for the additional spectrum to be high, Das said.
Aircel, which has spent $4.5-5 billion on network infrastructure in the past four years, has about 65 million subscribers, accounting for 9.48% of Indian mobile phone users, and a 4.6% revenue market share. The company is currently building its 3G network in 13 licensing areas where it won spectrum, and broadband wireless access (BWA) network in eight circles and expects to spend around Rs. 7,500 crore on it during the current fiscal. Parent Maxis has already spent Rs. 45,000 crore in India. Aircel doesn’t plan to sell shares to the public in the near future, Das said.
“The equity in this company is well above $3.5 billion and there’s an over-riding debt on top of that,” Das said.
The company expects demand for wireless data to surge. “We saw that 60% of the country is going to be under 25 and there is going to be a huge data demand and so we coined this expression of pocket Internet. We grew meteorically and I think in 2010, we were the fastest-growing telco,” Das said. “We want to be a great data services provider.”
The company also plans to bundle handsets with certain tariff plans to leverage its expertise in the area. “We will play in that area or, at least, facilitate in that area depending on how the economics go. That’s a very important area as you can have the best data network in the world but you can’t do anything about the device in the hands of people,” Das said. Aircel is unlikely to completely subsidize the handsets that it sells to customers. “The device subsidy model is a bit hard in India. It will have to be a part-subsidy, part-payment model,” Das said.
Das denied an 11 July The Economic Times report that said Maxis may sell its stake in Aircel to Russia’s Sistema JSFC. “For the last four years everybody has been trying to sell us off,” he said.
“We have got a lot of investment bankers in the country who want to create a lot of mergers and marriages. Everybody is always evaluating what the enterprise value of the company is because so much investment has gone into the country,” Das said. “This company has been one of the biggest foreign direct investors in the country, some $8 billion, including $3 billion on 3G and BWA, including capex, which shows serious intent to stay in this country. Everybody is talking to bankers but there are larger issues of greater concern.”
“Bankers are talking to operators and not operators talking to bankers. It’s the job of a banker. Every company talks to the bankers and for several reasons, in order to get an idea of the environment. Unless somebody starts doing due diligence and transacting money, there is nothing,” he said.
Das, however, did not rule out an exit from the country in the future, depending on the valuation he gets.
“Once the regulatory environment gets clearer, then a number of questions will be raised as to their (Aircel’s) business case in India. It doesn’t make sense for them to participate in the auction given that they have so much of spectrum and far lesser utilization as compared to any other operators,” a Mumbai-based brokerage analyst working with a multinational investment banking firm said on condition of anonymity.
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