Vodafone lines up $400-mn network
The objective is to transform Hutch Essar to a full-services national integrated telecom player.
KOLKATA/NEW DELHI: Hutch Essar, (soon to be rechristened Vodafone-Essar) may have an understanding with Bharti for infrastructure-sharing and using Airtel’s long distance network. However, this will not bar the company from setting up its own national and international long distance (NLD/ILD) networks.
Top sources told ET that HEL could invest close to $400 million (Rs 1,500-1,600 crore) in setting up its own fibre optic cable NLD network nationally to route its own mobile STD traffic. Project details will, however, be finalised only after Vodafone acquires majority ownership in Hutchison Essar, post-FIPB clearance.
The objective is to transform Hutch Essar from a ‘pure mobility player’ to a full-services national integrated telecom player along the lines of a Bharti Airtel, BSNL or Reliance Communications, company sources said.
“Hutch Essar under Vodafone control will be positioned as an integrated telecom player with a national footprint. In such a scenario, it will no longer have to lease capacity from existing NLDOs to route its mobile STD traffic,” said top sources close to Hutch Essar.
Incidentally, Bharti Airtel’s role in Hutch Essar’s NLD strategy in the backdrop of the super-sensitive Vodafone-Bharti infrastructure-sharing pact throws up interesting possibilities. A larger alliance with both companies pooling in their resources together cannot also be ruled out.
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In fact, Bharti group chairman Sunil Mittal, told ET that “both companies” may move towards a common infrastructure over the next few years. “We can also build the common infrastructure together. Complete sharing of our existing networks cannot be ruled out,” Mr Mittal said.
The Hutch Essar top-brass, it is learnt, is weighing the pros and cons of laying its own ground-level fibre optic NLD network which will connect all 23 circles (including the recently-acquired Essar Spacetel licences).
“Initial investment in laying fibre on the ground could be $250 million and go all the way up to $400 million. The investment size will hinge on a host of cost parameters. The average cost of laying optical fibre on the ground nationally could be Rs 4-to-5 lakh per route km,” sources said.
“Key determinants would be cable cost, duct cost, the right of way (RoW) cost coupled with trenching and road-restoration charges. There are no decisions yet on whether the cable will be imported or procured locally,” they added.
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A key issue that remains undecided is Essar’s eventual role in Hutch Essar’s NLD gameplan. According to Essar executives, its independently held NLD and ILD licences will not be part of the deal with Vodafone. “As with our infrastructure company — Essar Telecom Tower and Infrastructure — our ILD and NLD arm will also compete independently, and on rolling out services, will offer them to all service providers. It will not get any preferential treatment from HEL,” Essar sources added.
On HEL’s proposed NLD plans, Essar executives said, “All operational issues will be decided by the new board as and when it gets constituted.” Hutch Essar’s decision to hit the NLD turf was to rein in hefty carriage charges that it paid existing NLD operators for routing its mobile STD traffic. With an NLD licence, Hutch Essar can lease fibre capacity at a fraction of carrier charges and beef up tariff margins on long-distance calls.
Earlier, in absence of an NLD licence, Hutch-Essar had to rely on NLDOs and its variable payout to route mobile STD calls was huge, including access deficit charges (ADC) payable to BSNL, carrier charges payable to the rival NLD carrier and terminating charges payable to the network into which the mobile STD call terminates.
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