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|January 27, 1998||
Death by influenza
The Asian Flu's first victim in telecom could be Basic Teleservices.The Southeast Asian currency crisis' first victim in the Indian telecom sector could well be Basic Teleservices, a company that has the mandate to lay the country's first basic private telephony network in the state of Tamil Nadu.
The RPG group is promoting the project and all was well on schedule. Trouble began in the aftermath of the Asian Flu.
NTT and Itochu of Japan together hold a 49 per cent equity stake in Basic Teleservices. NTT, which is still primarily owned by the Japanese government, holds 39 per cent.
The remaining 51 per cent is controlled by the RPG holding company for all communications projects, RPG Communications Holding Limited.
The consortium had bid Rs 116.2 billion for the Tamil Nadu basic services circle. It is also committed to investing another Rs 13.3 billion in the project over the first three years.
NTT has apparently burnt its fingers in Thailand, where it had a 24 per cent equity stake in the Thailand Telephone and Telegraph and in Indonesia where it had invested in another basic services operator.
These were NTT's major international exposures and the Tamil Nadu project was expected to top both.
NTT's withdrawal from the project, either in part or wholly, could impact the abilities of the consortium to raise funds for the mammoth project because it may be difficult to replace a partner of NTT's pedigree.
Another consideration is that the Department of Telecommunications' licence conditions stipulate that the original promoters cannot drop their stake in the project below 10 per cent for the first five years.
NTT has now indicated to RPG that it may not be able to meet its equity commitments. However, it is not yet clear as to whether it would like to withdraw completely from the venture.
Dr Kumar S Dasgupta, chief executive, telecom projects, RPG Enterprises, has said that RPG may look for another promoter to replace NTT. But this decision will be taken only after NTT's intention is clear.
The only consolation is that the company is not under pressure from the DoT to convert its letter of intent into a licence as the two parties are already in court over the Department's encashment of the company's bank guarantees.
In a related development, the International Finance Corporation has agreed to fund around $50 million for RPG's two cellular projects - RPG Cellcom, which operates in Madhya Pradesh, and RPG Cellular, which operates in Madras.
While the finer details of the funding are being worked out, the Madhya Pradesh project and RPG Cellular in Madras have been sanctioned $ 25 million and $ 22.5 million respectively.
IFC already has an equity exposure in the holding company - RPG Communications Holding Limited. IFC holds 24.99 per cent. RPG controls the rest.
Dr Dasgupta has said that once the IFC funds come through, the cellular companies would have secured sufficient resources to see them through to breakeven point.
For the Madhya Pradesh cellular project, RPG expects to spend about Rs 4 billion in rolling out the project and another Rs 510 million as licence fee.
RPG, which hold 51 per cent in RPG Cellcom and its partner, Airtouch, which holds 49 per cent, have brought in around Rs 500 million by way of equity, while the Industrial Credit and Investment Corporation of India disbursed a Rs 300-million loan last year.
Adding the disbursement from IFC, a total of Rs 1.775 billion has been raised for the project. Besides, the company has also raised vendor finance from Ericsson.
In the case of RPG Cellular in Madras, the partners - RPG (51 per cent stake), Cellphone (26 per cent), Airtouch (20 per cent), Itochu and Mitsubishi (1.5 per cent each), have brought in around Rs 800 million as equity. Around Rs 400 million has been raised from the Industrial Development Bank of India and ICICI.
The last tranche has come from IFC, taking the total debt commitment in the project to roughly Rs 1.27 billion. This is expected to sustain the project until cash breakeven is achieved.
Dr Dasgupta said that the venture, now in its third year of operation, is still incurring cash losses.
- Compiled from the Indian media
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