VSNL, British Telecom relations soured
Mumbai: When it was conceived, it was like a dream come true. Today, months later, it is a dream turned sour. The partnership between India’s international telecom company, Videsh Sanchar Nigam Limited (VSNL) and the UK-based British Telecom (BT) envisaged the setting up of a $500-million regional hub in India.

In an unprecedented move, VSNL has blocked the telephone circuits of British Telecom into India following non-payment of dues by the latter. As a result of this BT’s subscribers are now getting across to India through other carriers, like Mercury and Cable & Wireless, who continue to be partners with VSNL.

According to VSNL sources, this drastic measure had to be taken in view of the fact that BT had not paid VSNL its dues, which stand in excess of Rs 100 crore.

In a report appearing in the Economic Times, BT’s head of external communications (Asia-Pacific), Kristen Hannah, stated from Australia that there was, indeed, a problem and the two partners are in talks to resolve issues soon.

According to the report, the dispute has arisen, on among other issues, the high incidence of transit fees which accrued to BT as a result of calls from other carriers transiting through BT, en route to India.

VSNL felt that as the transiting country receives the transit charge and this gets deducted from the total accounting rate, which is split equally between two carriers, it stands at a loss owing to the high amount of transit taking place through BT.

Similar differences had arisen between VSNL and some international carriers a few months back, after it was found that there was a delay in receipt of payment. As the ratio of incoming calls far exceeds the outgoing ones, VSNL is a net recipient of foreign exchange from these carriers and its revenue stream depends on this.
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Japan Tobacco seeks full control of Modi RJR
New Delhi: Japan Tobacco, the world’s third-largest cigarette company, which acquired the operations of the US-based RJ Reynolds, has sought the Centre's permission to increase its holding in the Indian joint venture company, Modi RJR from 50 per cent to 100 per cent. It plans to do so by buying out the Indian partners — M K Modi and the Hindustan Group owned by Hemant Sonawala.

Modi RJR was a joint venture established in 1995 between RJ Reynolds International had through its wholly-owned subsidiary — RJR Mauritius — and M K Modi’s Modi Enterprises and Hemant Sonawala’s Hindustan Group, for manufacturing and marketing cigarettes. The company’s existing unit at Hyderabad has a production capacity of approximately 700 million cigarettes per year as against a licensed capacity of five billion.

It had launched the Contessa brand in India but sources say it has not been a success. Due to low production and market penetration levels, the joint venture’s operations have been unviable and it has incurred a cumulative loss of nearly Rs 12 crore.

Modi RJR requires fresh infusion of funds but the Indian partners are unwilling to invest in the company and want to exit from the joint venture company. They have given their "no objection" to the proposal by Japan Tobacco for the increase of its stake in the company.

The original approval given to the joint venture in 1993 had stipulated that if the Indian partners exit from Modi RJR, their 50 per cent holding would be transferred to new Indian partners. However, given the poor health of the company, Japan Tobacco has been finding it very difficult to get new Indian partners for the venture. Hence, its application to the government for taking over the entire equity of the company. According to the application, it is understood that if Japan Tobacco is not permitted to acquire the holding of the Indian partners the operations of the joint venture would have to be shut down.
The proposal also states that the Japanese giant will reduce its stake in Modi RJR in favour of Indian partners or public within a three-to-five year time period.

The current government is not in favour of allowing 100 per cent foreign investment in the tobacco sector, and, at present, no foreign company has a wholly-owned subsidiary in this sector.
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AirTel to set up Ku-band gateway in Bhopal
Bhopal: AirTel, a private basic telephone service provider, is going to set up India's first Ku-band international gateway in Bhopal that will allow customers to get large chunks of bandwidth in a short time.

The company is said to have signed a memorandum of understanding (MoU) with Software Technology Parks of India (STPI) for gateway access to software units in Madhya Pradesh. The company will then be able to provide access to international gateway facilities for high-speed data communication to software units in the state.

Software units in MP are at present dependent upon Videsh Sanchar Nigam's gateways in Mumbai and Delhi.

AirTel has registered one lakh phone subscribers and is offering free access to the Net via Mantra Freenet.

On the technology front, AirTel uses the WLL (wireless local loops) technology and copper cables.
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BT to revamp local operations
Calcutta: In line with the ongoing reorganisation within its parent company in the UK, British Telecom will be splitting its operations in India into distinct units.

Under the scheme of things, the assets and requirements of AirTel mobile services, which is a joint venture between BT and Bharti Enterprise will come under fold of a new unit, Wireless, the Internet service provider Mantra Online and future mobile Internet business would be clubbed under the stewardship of BT Open World.

BT also has a joint venture with Mahindra & Mahindra for software which will come under the aegis of Ignite.

All these changes will be effective from July 1.
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Reliance Petro force oil majors to change their plans
New Delhi: According to a report in the Economic Times, the coming on stream of Reliance Petroleum’s 27.5-mt refining capacity in Gujarat has forced oil majors like Shell, Chevron and Exxon to put on hold their plans of adding refining capacity in South Asia and, instead, concentrate on marketing of downstream products and upstream activities.

These giants had looked to India and China to add refining capacity , with most of the other East Asian countries already saturated in their refining capacity. For instance, Singapore has a refining capacity which is more than double its demand for petroleum products.

However, with the commissioning of the RPL refinery, the refining capacity in the country increased from 69.14 metric tonnes per annum last fiscal to 109.04 metric tonnes this year. As per the current projections the refining capacity in the country is expected to go up to 129 million metric tonnes per annum by the end of the 9th plan as against an estimated demand of products of 110 mmt. As a result there is a definite shift in the strategy of the multinational oil giants.

They have put on hold their plans for adding refining capacity and have, instead, begun looking for marketing of petro-products in anticipation of the opening-up of the Indian hydrocarbon sector.

Energy Outlook 1999 projects India’s oil consumption will grow another 53 per cent by 2005, reaching 2.6 million bbl/d (up from 1.7 million bbl/d in 1997). India’s current Five Year Plan (1997-2002) forecasts that the country will exhaust its crude oil reserves by 2011-2012, even if only 30 per cent of demand is met through domestic production.
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Tata group to inject Rs 100 crore into ISP India
New Delhi: As the group plans its foray into the internet domain, with a clear vision of being the country’s largest player in the end-to-end internet-related services space, it is set to invest Rs. 100 crore in ISP India Limited, the company that will take the group into the forefront of the net world. It is understood that the chairman of the group, Mr. Ratan Tata, is personally taking interest to see that the company does well.

It is understood that Tata Industries will have a majority holding in the new venture, with other Tata group companies playing a minority role. ISP India, which will be based in Mumbai, will have support centres throughout the country.

In a bid to support the new venture at its nascent stage, Tata Industries is expected to help in the marketing activities for the new company, while TCS has been given the responsibility of providing technology backup and support.

The Tatas are also evaluating possibilities of getting outside help in areas where the group does not have strengths to provide the right impetus to the new company.

ISP India has plans to become a national ISP and has initiated steps in this direction by obtaining regional ISP licences. Later, the company also has plans to install its own international gateways.

Besides access services, the new company will also be involved in several vertical portals such as travel, women and finance — with some portals expected to go live by the second quarter of the current fiscal.
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Delphi Auto targets replacement market
New Delhi: Delphi Automotive Systems Ltd (DASL), the wholly owned subsidiary of Delphi Automotive Systems of the US – which was established in 1995, is planning to introduce automotive parts such as oil filters, spark plugs, batteries and air-conditioning units in the after-market or replacement segment of the auto component market.

According to, Mr. Anil Verma, managing director, the company is hoping to achieve accelerated growth in the after-market for auto components. Currently, its sales comes largely from the original equipment (OE) segment of the market where it supplies to manufacturers such as MUL, General Motors, Fiat India, Volvo, Telco and Daewoo Motors India.

Besides planning to launch an extensive brand awareness campaign during the next few weeks, the company is also looking at local acquisitions and co-branding strategies for penetrating the after- market for automotive parts.

Earlier this year, Delphi India reorganised its after-market operations into a new division focused on growing its operations, following a similar exercise that Delphi undertook worldwide consequent to its demerger with its original parent - General Motors of the US.

Delphi is expected to produce a wide variety of aftermarket products in India, which fall under five key categories. These include under car products (such as shocks and struts), thermal systems (such as air-conditioning), energy and engine management systems (such as alternators and batteries) and electronics (such as security systems).
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Mannesmann exits Sachs India Limited, sells stake in SIL to Indian promoters
New Delhi: Mannesmann Sachs AG of Germany has decided to exit its joint venture in India by selling of its 57 per cent stake in the ailing Sachs India Ltd (SIL) to the company's Indian promoters at a mutually agreed total consideration of Re. 1.

After the sell off, the Indian promoters in the joint venture, led by Mr. Ashish Dasgupta, have agreed to assume all liabilities in the company. The total amount of liabilities in the company as on December 31, 1999, stood at Rs. 3.39 crores, out of which dues worth Rs. 1.16 crores were on account of net current liabilities (negative working capital). The amount of accumulated losses as on December 31, 1999, stood at Rs. 35.30 crores against total shareholders' funds of Rs. 39.73 crores.

Consequent upon Mannesmann Sachs' withdrawal from the company, the name of the company has been changed from Sachs India Ltd to AutoComps India Ltd. According to Mr. Dasgupta the new management of the company has also decided to expand the product range of the company by including `front forks' for motorcycles in its portfolio. The company is in talks with various two-wheeler manufacturers, including the Kanpur-based LML Ltd, for supplying front forks for their respective motorcycle projects.

SIL is mainly engaged in the manufacturing of shock absorbers for scooters for companies such as LML, Bajaj Auto and Scooters India Ltd.
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Thapars block recast plan for Crompton Greaves
New Delhi: The restructuring plan, which entailed splitting the Crompton Greaves’ four businesses -- digital products, electrical goods, industrial systems and power systems -- into four separate companies, has been put on hold by the Thapar family which has a 30 per cent stake in the company. The plan mooted by Mr. K.K. Nohria when he was the chairman and managing director of the company, was done in-house with legal assistance from Andersen Consulting.

In May this year, Mr. Gautam Thapar and his brother Mr. Karan Thapar were co-opted on the Crompton Greaves board and Mr. Nohria stepped down as the managing director of the company. He is now the non-executive chairman of Crompton Greaves, while Mr. Sudhir Trehan is the managing director.

According to family sources the restructuring was delayed because they felt that the recast would in no way add to shareholders value. Instead the family has constituted a high-power committee comprising Mr. Gautam Thapar, Mr. Karan Thapar, Mr. Nohria, Mr. Trehan and head of finance, Mr. Brij Suri to chart a future roadmap for Crompton Greaves.

It is stated that Mr. Gautam Thapar believes that the situation at Crompton Greaves is similar to what obtained at Ballarpur Industries (Bilt), the Thapar flagship, two-and-a-half years ago when he had taken over. He had then restored Bilt’s fortunes by selling out of non-core joint ventures, cutting costs and giving the company a marketing focus and does not rule out using similar tactics at Crompton Greaves.
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American Airlines, Northwest in merger talks
New York: In what may bring about greater consolidation in the American skies, American Airlines is said to be in discussions about a possible bid for Northwest Airlines Corp. According to a report appearing the US television station, KSTP-TV, an announcement in this regard is likely to come out very soon.

Just some days ago, UAL Corp, parent of United Airlines, announced that it planned to buy smaller rival US Airways Group Inc for $4.3 billion.

As competition increases and bottom-lines come under pressure, clearly airlines whose networks overlap the least are more likely to talk to each other. Network overlaps pose obstacles to airline mergers because they raise competition concerns, which are dealt with severely by the US government.
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Acquisitive Colgate-Palmolive may eye on Gillette
New York: In a research note published by reputed investment banking company, Goldman, Sachs & Co., its senior analyst, Ms. Amy Low Chasen, predicts, after a meeting with the management of global giant, Colgate-Palmolive Co., that the company will be looking for aggressive acquisitions in the near future.

In keeping with this observation, the report predicts that Colgate may eye consumer-products company, Gillete Corporation for a possible take over. Colgate had apparently indicated that "Gillette could provide a good fit,, but the report went on to say that Colgate would not entertain a hostile bid.

Analysts felt that a deal between Colgate and Gillette would "make sense strategically," but added a transaction is "not imminent" and there’s a "fairly low probability" of such a deal. This is because, with a current market value of about $36 billion, the take over would be a big stretch for Colgate, which has a market capitalization of about $32 billion.

Unfortunately, Gillette has been stumbling in recent quarters because of sluggish growth and underperforming product units. It has already initiated moves to sell off unrelated businesses, and instead concentrate on its core competencies in the area of razors and blades.

Earlier this year, Gillette said it hired investment bankers to sell part of its Braun appliance unit.
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