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Broadband segment is rapidly expanding and there is room for more: Jerome Booth [Emirates News Agency (WAM) (United Arab Emirates)](Emirates News Agency (WAM) (United Arab Emirates) Via Acquire Media NewsEdge) New Call Telecom, a UK-based internet service provider (ISP) has acquired a controlling stake in Nimbuzz, an India-based company that offers call and messaging services. Dr Jerome Booth, chairman, New Call and author of 'Emerging Markets in an Upside Down World' tells Puneet Wadhwa that the telecom market in India is very under-served in the broadband segment. The acquisition will enable us to build market presence in our strategy of helping bring broadband to the population of India in-line with the government's 'Digital India' policy, he says. Edited excerpts: Can you give some clarity on how much have you already invested in India and how much more can one expect over the next 6 - 12 months? That's a difficult question to answer for several reasons. One, there are commercial agreements that I have signed, which means that I can't, in good faith, give out numbers of how much I have invested. What I announced a few weeks ago that we'd be putting in an initial $100 million. This acquisition has been valued at a certain level in the press. This does not mean we have actually put in that much but we are investing a significant sum. We plan other acquisitions going forward. If things work out well, then I would be in a position to expand this investment position significantly. But I don't expect that to happen this year. I do have a great interest in the sector - TMT (Technology, Media and Telecommunications) more widely and India, Asia more generally. There is huge potential of doing more what we are doing. However, first we have to demonstrate that what we are doing is right. What made you look at India as an investment destination? One argument that one looks at emerging markets for investment is that it gives diversification. However I am buying controlling interests, and so cannot spread too wide. I am investing more in India than in any other country. One needs to be focussed in one's approach while investing in controlling interests. If I was going to be cryogenically frozen for thirty years, and had to invest all my assets in only one country and that country could not be where I live in or where my liabilities are, I would be looking at countries with strong institutions. I would also be looking at countries that had large growth potential, a large hinterland and where there is consumption driven growth. India clearly falls under these categories. Other countries, like Brazil, might be on the list but they are suffering from much lower levels of growth. I don't expect much structural reform there and the growth could be around 3% during the next presidential period. China, however, has much more growth potential. But there are risks in China that aren't there in India. The other countries I would be looking to invest are Indonesia and I see that as a huge market like India. India has a lot of things going for it. We have a new government at the centre and a very capable central bank with a credible leader. The new government is pro-reform and pro poor, which is a key positive. People expect Narendra Modi to be around for a decade (in power) and now everyone, including those who were not pro-reform earlier are pushing in the same direction. That's a very encouraging sign for us. Why specifically Nimbuzz? How does it fit into the bigger picture you have in mind for India? Nimbuzz has over 200 million users in 210 countries and is a business which will play a key role in our strategy 'My Digital Life' providing digital service in the home, office and public spaces. The already significant customer base in India of 40 million will enable us to build market presence in our strategy of helping bring broadband to the population of India in line with the government's 'Digital India' policy. Are you looking at any other sector besides telecom? Personally, I am investing in telecom because it is a sector where we have a presence in the UK, where New Call is the sixth largest ISP (internet service provider). We are investing as a phone company and not as a financial investor. Among all the infrastructure and related sectors, telecom is by far the fastest growing sector. But aren't regulations a hindrance while investing? The telecom sector, I feel, is regulated very well. The regulations in India are very similar to that in the UK. Since we compete in the UK, we feel that the regulations are fit for purpose. The regulatory structure has been designed effectively to encourage competition for the benefit of the end consumer. And there is a similar philosophy and approach here. Which specific companies are you targeting in India? Would you expand footprint into e-commerce? I can't mention specific names. The other things we are currently invested in in the telecom space are in the public wi-fi space and fixed-line broadband. What we are trying to do is build more income streams around these businesses. We are very excited about e-commerce and the range of new revenue streams just starting in India. Another thing is the timing of your investment. Why now? Were you waiting for more clarity on policies? We were not waiting for the new government, but it is a plus. The cry here in India is that there is an urgent need for much more infrastructure, and also affordable housing. I am particularly interested in TMT. The growth levels of Indian economy have been held back because of lack of confidence over government policy and high interest rates before Raghuram Rajan took over as the Reserve Bank of India (RBI) governor. All this, in turn, led to lack of domestic investment. I think there will be a lot more investment coming through and that's why we are positive. Do you think the Indian telecom sector could see consolidation / mergers and acquisitions over the next few years? Why does India need New Call? While there is great technical expertise in the sector, the one thing we bring as New Call Telecom is understanding of marketing and a better understanding of how to generate a range of different revenue streams as opposed to focussing on just one or two. But the structure of the industry is also important. There are a number of smaller players constrained by lack of capital, and then you have the bigger players. The interesting thing is that the bigger players have focussed on mobile phones and have sunk billions of dollars into mobile phones - both in licences and other investments. They need to recoup that investment and they're very focussed on that. Meanwhile, not many have paid attention to the broadband that India requires. The market, I believe, is very under-served in broadband. And this is a good, exciting opportunity to be in. I see big operators continuing to focus on mobiles and don't see them just as competition but as partners. This is similar to what we have been doing in the UK. We are smaller than other players in the UK like Virgin, Sky, and British Telecom (BT). We have not just managed to compete with them in some business areas but actually helped them in many ways. And this is true for India as well where we can help with such things as wifi offload. There are a lot of calls being routed through wifi and we can help these bigger companies actually deliver better service to their customers. Broadband is a very rapidly expanding space - a positive sum game. There is room for more players here. But excessive regulations in India could be an impediment for growth? I don't think there are too many regulations in the telecom sector. We have another transaction here in India which is under regulatory review. This takes time. But the basic framework allows us to do what we want to and be competitive. We have already seen a radical decision by the Supreme Court on coal block allocations. What if something similar is delivered on the 2G spectrum allocation case? Will you look at India in a different light then? I don't want to comment on the detail, but the principle of having legislation that has a retroactive impact governments in any sector and in any country should think very carefully about. It has a very damaging impact on the image. If there are capital controls, long - term funds, pension funds are hesitant to invest in a country. So, very simple, clear and pro-active messages are important from the government and policy makers. The message from India is that it is open for business and one would be foolish to mess around with that. There have been historical cases in the telecom sector in India - tax related issues and regulation related issues. These are things of the past. The message now being conveyed by the government is that India wants to do business. Is the government listening? It is not my advice which matters most. I have faith and trust in this government, which needs to follow its own good sense, and that's happening. Development is not primarily a technical set of problem. The answers to economic questions are not unknown. Rather, there are many examples where ownership of an idea is the key to success. People are getting impatient for the government to deliver on reforms but they need to realise that for reforms to happen, one needs to get all stakeholders on board and then move forward. This will take time. I am hopeful that's exactly what's happening right now. The local (State) election results have boosted the government's credibility, and that also helps everybody support the government's pro-reform pro-poor agenda. (c) 2014 Emirates News Agency (WAM) Provided by SyndiGate Media Inc. (Syndigate.info). |