Hindujas, Bajaj Auto and S Kumars in line to join insurance bandwagon
Mumbai: With the Insurance Regulatory and Development Authority (IRDA) only weeks away from accepting the first applications from prospective promoters for the insurance business, more private companies are joining the bandwagon.

The Hinduja group is venturing into all three forms of insurance -- life, general and re-insurance. The group is said to be in the process of wrapping up deals with two-three different collaborators specialising in each of the three sectors. It is expected that the foreign partners, IndusInd Bank Ltd, the bank promoted by the group, will hold up to 20 per cent stake and the balance will be held by the group, subject the RBI guidelines.

Cash-rich Bajaj Auto is said to be planning to enter the non-life insurance sector through a possible tieup with a foreign partner. Although, Bajaj Auto has enough funds to set up an insurance company on its own and meet the growing capital requirements, it will require a foreign partner for the expertise. It is not yet clear whether the firm has decided on offering an equity stake to the foreign partner.

Textile company, S Kumars, which has recently entered into the internet arena, is looking at a three-way partnership and is reported to be in talks with Jammu and Kashmir Bank as the second partner with a foreign insurance firm joining as the third partner.

Almost all companies who have announced their intentions to get into insurance business have announced a tie-up or an intention to tie up with a foreign partner. The only exclusions to this are the Reliance group (non-life and life insurance ) and Kotak Mahindra Financial Consultants (non-life insurance business). Both these companies plan to set up 100 per cent subsidiaries.

Among the prospective entrants, interest is keener in the life insurance segment as this is the business which has been driving premium growth world-wide. Industry watchers expect a dozen players in life and a half of that in non-life when licences are finally issued.
Back to News Review index page  

PowerGrid and Spectranet to develop long distance network
New Delhi: Spectranet, an internet service provider, has joined forces with Power Grid Corporation, to develop a telecom network especially in the area of national long distance telephony.

Under the alliance, PowerGrid – which is planning to enter the national long distance operations with a strategic partner -- would provide bandwidth on its long-distance network to Spectranet which is creating intra-city optic fibre network to provide various telecommunication services to end users.

PowerGrid is planning to develop a core network of about 14,000 km for the venture. In the NLDO venture, PowerGrid would give its network on lease besides taking a stake in the operations. The estimated cost for setting up this network is approximately Rs. 13,800 crore.
Back to News Review index page  

VSNL may get reduced accounting rate for international long distance
New Delhi: The government, which is currently engaged in negotiations with leading US telecom companies to fix new accounting rates for international long distance calls to and from India, proposes to reduce VSNL’s accounting rate with US carriers to 85 cents from the current level of $1.08. When announced this rate will be applicable from April 1, 2000.

International telecom carriers make settlement payments to each other for allowing companies to use each others facilities for completing calls. Thus VSNL makes payments to foreign carriers for outgoing traffic from India and receives payments for traffic which it receives from other countries.

India has given a commitment to the International Telecommunications Union to reduce accounting rate to 69 cents per minute by the end of 2001. The reduction is to be done in stages and the proposed reduction to 85 cents is the first step in this direction.India has recently been under intense pressure from the leading US telecom companies to reduce accounting rates between the US and India.

Since telecom tariffs in India are higher than that of the USA, calls originating from the USA exceeds those originating from India. Consequently VSNL receives net payments from the USA.

This had led to demands in the USA that accounting rates should be reducing since it was resulting in a loss of revenue to US telecom companies.

The reduction in accounting rates would adversely impact VSNL’s revenues since settlements payments would be substantially reduced. VSNL’s 1998 GDR prospectus points out that implementation of the FCC order will reduce settlement payments.

However, VSNL will not be immediately affected since its revenue sharing arrangement with DoT allows it to reduce payments to DoT if settlement payments decline because of a cut in accounting rates. However this revenue sharing arrangement is only in force till March 31, 2002.
Back to News Review index page  

DoT mulls third generation cellular telephony
New Delhi: If the department of telecommunications has its way, third generation cellular phone networks, which promise high speed access to the Internet, could make their appearance in India in the near future. A committee headed by Telecom Commission member, Mr. Vijay Kumar, has been set up to evaluate the modalities and fix the time-frame within which third generation cellular services can start. The committee is to submit its report by the end of the year.

Third generation, or 3G as it is called, is in the laboratory stage even in the West. However, India has decided to start work on it, since the country has to eventually to shift to it.

The government may choose the operators based on the, currently, favourite method of frequency spectrum auction. In May the UK government raised a staggering 22 billion by auctioning of 3G licences. Of this, 11 billion were payable upfront.

While the DoT’s in-house team will evaluate both options, the auction method is likely to be favoured because of the potential to generate revenues for the government. Though the idea is still at a preliminary stage in India, the advent of 3G networks would also eventually affect the valuation of today’s cellular phone networks.

3G networks would be able to offer a whole range of value added services including high speed internet access compared to conventional networks. 3G cellular phone services are considered to be at the cutting edge of cellular phone technology. Its main difference with the present generation of cellular phone networks is that access to the internet becomes much faster.
Back to News Review index page  

Stanchart-Grindlays merger encounters new twist
Mumbai: The complicated merger between Standard Chartered Bank and Grindlays, has taken a new twist with the National Housing Bank (NHB) filing a petition in the Supreme Court asking for the Rs 907 crore it had paid to ANZ Grindlays following an arbitration award in 1997.

According to the National Housing Bank, since post-acquisition Grindlays will cease to exist in India, it should pay up the money now. The petition will come up for hearing when the apex court opens after the summer vacation.

The amount became a bone of contention between the two financial institutions, after the Harshad Mehta scam broke out in 1992. Currently an appeal lies in the Supreme Court against a verdict passed by the arbitration bench awarding Grindlays’ the right to get the stated amount from NHB. Grindlays’ had, however, given an undertaking that in case the Supreme Court judgment goes in favour of the NHB, it will return the money along with 18 per cent annual interest. The Indian subsidiary of ANZ Banking Group has already repatriated the money to the parent.
Back to News Review index page