Backed by his extensive experience in telecom, Sanjeev Chachondia joined New Silk Route (NSR), an Asia-focused private equity firm with $1.4 billion of assets under management, in September 2009. He started his career as an Indian Railway Service officer of 1987 batch, and in 1997 took the private sector plunge by joining BPL Telecom Business Group. Over the past two decades, he was at the helm of several telecom companies, including Essar Telecom Infrastructure (Chief Operations Officer), Tata Teleservices (Vice-President, Corporate Planning & Strategy), BPL Mobile Communications (CEO) and also Loop Telecom (CEO). He was a part of the brand transition at BPL Mobile, when the company became Loop Mobile. NSR, which invests in private companies in India, Asia and West Asia, has more than 80 per cent of its investments in India and is also looking at bringing investors into portfolio companies such as Ascend Telecom . In an interview with BusinessLine, Chachondia, operating partner at NSR, talks about the telecom sector and NSR’s plans for the renewable energy sector. Excerpts:

The ongoing spectrum auction seems to be less frenetic than earlier ones?

Spectrum is an important raw material for telecom services and now the operators need additional spectrum with many of them offering 4G services. With technologies such as carrier aggregation, companies have no real compulsion to have large spectrum in one particular band. Earlier, they could only do aggregation of contiguous spectrum, but now operators can aggregate spectrum across bands such as 1800 MHz and 2300 MHz. Intra-circle roaming, spectrum sharing and trading have also resulted in reduced need for spectrum. Hence I believe, telecom operators will have a guarded approach to auction this time.

Call drops are still a raging issue in the industry, and wouldn’t a guarded approach at the spectrum auction further impact quality?

The calls drop not only because of lack of towers or spectrum, but also due to interference and when the handover is not smooth. The simplistic view is that call drop is due to less number of towers and not enough spectrum, which is partially true. ‘Destructive interference’ due to many towers in close proximity, emitting the same frequencies also leads to call drops.

Another issue is that calls jump between technologies —Edge, 3G, H, H+, LTE — and between spectrum such as 900 Mhz, 1800 Mhz, 2100MHz and between base stations with different technologies and capabilities. All these result in call drops, and many times the answer is intelligent network optimisation.

Will the onslaught of broadband and free calls over LTE networks kill voice revenues?

The per-minute voice tariff will soon be history as broadband will disrupt the market. On a 1 Mbps pipe that 4G operators provide, voice only needs 8-16 Kbps, which is an insignificant portion. So, actually voice can be provided free with 4G and that will lead to the death of per minute pricing and disrupt voice revenue model.

The content for voice calls — voice and SMS — is generated by users, who also pay for it. So, voice calls are the most profitable applications for telecom operators and operators will resist giving up voice revenues as much as they can. Now, telecom companies have to pay for content (songs or videos) which is generated by a third party.

Is the tower space not growing as expected with only 4.20 lakh towers across the country?

I think, we definitely need to erect more towers in the areas those are falling in the shadow zone. In fact, India needs lot more towers with latest technologies, and we will see a large number of monopoles, smart poles and light towers (for small cells) coming up.

Why are PE players shying away from investing in telecom companies?

The major reasons are the large investments telecom firms need and the long gestation period. A fund, with a limited life of 5-7 years, will not find it attractive to invest and exit in that period. A fund like ours, which stays invested for 10 years or more, will definitely be interested in telecom. NSR is a large investor in telecom infrastructure (Ascend Telecom) and broadband wireless (Augere), holding majority stakes. I think going forward PE funds would be interested in niche areas in telecom. There are PE firms that can do buyouts, but that would be large investments.

What are your plans for Ascend Telecom Infrastructure, in which you own 70 per cent?

We have been scaling it up. Today, we are at 5,300 towers with a tenancy ratio nearing 2X , and we will add about 500 towers this year and 800 towers every year thereafter. So far, NSR has invested from its own fund and going forward we will look for like-minded investors.

What opportunities do you see in the renewable energy space?

We have invested in Kiran Energy Solar Power and continue to look at investing in mid-sized companies that are backed by a good entrepreneur with a vision and passion. At this point, we are not doing any new investments but will do follow-on investments. We are keenly looking at interesting opportunities in Railways and Defence, and we believe that with the government’s focus on these two sectors, there will be significant funding from PE sector.

Is there a waning interest from Limited Partners this year?

I wouldn’t call it a waning interest, in fact India always has been an attractive market. The previous five years before 2015, India has not given as much returns to investors as other markets such as China but it has improved from 2014. LPs are continuing to invest in India.

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