India Telecom Goals Disappoint
nytimes.com
Filed at 12:53 p.m. EDT, July 28, 1998
By The Associated Press
NEW DELHI, India (AP) -- When the Indian government's
telecommunications monopoly ended, big names rushed in hoping to
hook a middle class estimated at 250 million people to cell phones,
pagers and basic telephone service.
Four years later, companies like AT&T, Bell Canada and British
Telecom, all partnered with Indian companies in the telephone
projects, are admitting their dreams were inflated.
They stumbled into a morass of red tape that has delayed the ability to
make even the money owed the government for the right to do
business in India.
Telecommunications was the showpiece after India launched economic
reforms in 1991, breaking five decades of socialist-style insularity. The
telecommunications monopoly was ended in 1994, and more than a
quarter of the total foreign direct investment in India in 1996-97 of $6
billion was earmarked for telecommunications.
Among the problems companies like AT&T have encountered is
finding that a deal struck with one arm of government -- the
Department of Telecommunications -- didn't clear the way to doing
business. When it came time to lay cables for basic telephone service,
the Surface Transport Ministry asked for fees on top of the license fees
owed the Telecommunications Department. When some companies
tried to avoid that extra cost by stringing their lines from existing
electricity polls, the Power Ministry made its own demands.
''Sometimes it takes longer than expected'' to do business in India,
said Virat Bhatia, AT&T's spokesman in New Delhi.
A new government took over in March saying it would concentrate on
developing India's infrastructure. In his budget, Finance Minister
Yashwant Sinha promised to cut red tape for investors and proposed
spending 611 billion rupees ($1.5 billion), a 35 percent increase, on
what he called the key areas of energy, transportation and
communications. But such pledges have been made before, with little
to show today.
Some things have improved. In 1991, it could take all day to make a
phone call from New Delhi to Calcutta or Bombay because lines were
so few. Intercity calls are easier now, but thousands of villages still
have no phone lines. In a country approaching 1 billion people, there
are fewer than 18 million telephones.
In the heady early days, says entrepreneur Sunil Mittal, ''every hotel
room was occupied by bankers, consultants and technicians. You
couldn't even talk without being overheard by rivals.''
Mittal's Bharati Enterprises, in partnership with Telecom Italia,
launched India's first private telephone service in early June in Madhya
Pradesh state with 2,000 subscribers. Foreigners can have up to a 49
percent share of Indian telecommunications companies.
Mittal, from a politically powerful family, also runs cellular services in
northern Himachal Pradesh state and in New Delhi.
It took more than three years for even the politically savvy Mittal to get
to the first Bharati phone call. He said it is gradually getting easier to do
business.
Corruption has plagued the reform effort, though few people are willing
to discuss the issue for fear of angering government officials with whom
they want to do business. Former communications minister Sukh Ram
is suspected of taking bribes in exchange for awarding government
contracts -- federal agents raided his New Delhi home in 1996 and
found 30 million rupees ($857,000) in cash and jewelry.
As for cellular, growth of mobile phone subscribers began to slow after
reaching 100,000. Revenue per subscriber was estimated at around
2,500 rupees ($59) per month, but it turned out to be less than 1,000
rupees per month, said T.V. Ramachandaran, executive vice-chairman
of the Cellular Operators Association of India.
Nearly 8 percent of subscribers don't pay their bills, a higher than
expected default rate. The 23 cellular companies operating in India, all
partnerships between Indian and foreign companies, have together
accumulated losses of 20 billion rupees ($476 million), Ramachandaran
said.
Individual companies won't specify what losses they have incurred
because they have not yet been able to start doing business. And they
say they did not expect to make money right away.
Entrepreneurs say their survival depends on the government suspending
license fees for two to three years. Fees vary widely, and are based on
the bids the company offered to win the contract. One company bid
140 billion rupees ($3.3 billion) over 15 years to provide basic
telephone services in Maharashtra state, while Mittal won a similar
contract in Madhya Pradesh for just 6.54 billion rupees ($155.7
million).
''We made a mistake,'' said Ramachandaran, saying investors were
misled by India's annual economic growth rate of 7 percent to 8
percent in the early 1990s.
Growth was 5 percent in the fiscal year 1997-98, the lowest in the last
five years. Prospects were further battered by a sharp plunge in the
rupee following international economic sanctions imposed as
punishment for a series of nuclear weapons tests in May. It will be
tougher to arrange foreign funding for projects in India, said AT&T's
Bhatia.
Bhatia said the industry was desperate for ''a definite, dynamic
gesture'' from the government.
The new government is expected to pronounce in September whether
it will give entrepreneurs the fee break they have requested, a
communications ministry official said on condition of anonymity.
Related Information From Hoover's Inc.
Telecom Italia SpA
AT&T Corp
British Telecommunications PLC
Home | Site Index | Site Search | Forums | Archives | Marketplace
Quick News | Page One Plus | International | National/N.Y. | Business | Technology |
Science | Sports | Weather | Editorial | Op-Ed | Arts | Automobiles | Books | Diversions |
Job Market | Real Estate | Travel
Help/Feedback | Classifieds | Services | New York Today
Copyright 1998 The New York Times Company
The information contained in this AP Online news report
may not be republished or redistributed
without the prior written authority of The Associated Press.
|
