The Hindu Business Line : SingTel, Bharti plan new venture for long distance telephony

Long-distance plans
SingTel Australia Holding has approached the FIPB for setting-up a subsidiary or joint venture entailing FDI up to 74 per cent.
The venture is primarily targeted at multinational companies which require global connectivity.

Moumita Bakshi Chatterjee
Thomas K. Thomas

New Delhi, Oct 25 SingTel Group and Bharti Group are planning to set up a new venture for long distance telephony services, primarily targeting enterprises. SingTel Australia Holding, Singapore, has approached the Foreign Investment Promotion Board (FIPB) for setting-up a subsidiary or joint venture in India entailing FDI up to 74 per cent for telecom services.

Bharti would hold 9.9 per cent stake in the new joint venture company, and has given a conditional no-objection to the proposed venture. Sources said the move was necessitated as SingTel’s Australian subsidiary wanted to offer international connectivity to its corporate clients in India. The venture is primarily targeted at multinational companies which require global connectivity.

Sources pointed out that a recent policy change by Department of Telecom (DoT) made it mandatory for companies to take a separate licence for offering international bandwidth for services like Virtual Private Network and leased line. This will put SingTel Australia in competition with the likes of AT&T, BT and France Telecom subsidiary Orange Business Solutions.

Other US global carriers like Cable & Wireless and Verizon have also applied for similar licences. Demand for international bandwidth is primarily being driven by growth of BPO and ITeS operations in India.

However, this could also lead to direct competition with Bharti’s existing long distance business in which a SingTel Group company also has stake. But Bharti officials said that permissions from FIPB was being taken only as a formality as per policy requirements, and did not see much impact on Bharti’s existing operations. They pointed out that synergies could be derived between the two ventures.

At present, while Pastel Ltd (a SingTel Group company), holds 15.6 per cent in the paid up capital of Bharti Airtel, it also holds 32.81 per cent in the paid up share capital of Bharti Telecom Ltd. It is not clear whether the cross holding norms specified by DoT would be applicable on the new venture.