3G Auctions - Rationalization as expected

As I had speculated in my previous post, the auctions are past their inflection point. We have seen more sane bidding on an overall basis, and mostly the serious players for each circle are in the fray.

My understanding of circle wise bidding, at end of day 9 is as below:

Please click on the image to see it in larger size. 
1 - Player is bidding for the circle
0 - Player is not bidding for the circle

3G Auctions - Who is bidding for what?

A lot has changed in the last 2 days of bidding for 3G spectrum. Bidders have moved their hands deeper into their pockets and are using most of the ammunition they brought from their base camp. As per the auction rules, as rounds progress, the minimum bid points to be placed by each bidder (from its share) goes up. So, the greater bids are partially because of that. Also, the serious bidders in each circle will want  to get rid of the not-so-sure ones.

I believe this day was the inflection point in the bidding process. From the next round of bidding (and going forward), one will see, players moving from circles they don't necessarily are adamant on, to other circles that are still relatively easily available.

Here is my guess, of which players are bidding for each circle at end of day 7.

Please click on the image to see it in larger size. 
1 - Player is bidding for the circle
0 - Player is not bidding for the circle
 
For a similar table on day 5, click here.

3G auctions - End of day 5

As many of you will know, 3G auctions are going on in India. It is a long drawn process and is expected to continue for 2-3 weeks. At end of each bidding day, the standing for the various circles are released as of the end of the day (after accounting for all rounds that took place on the day).

I went through the releases for the first few days and wanted to see if someone is speculating on who has bid for which circles. I failed to find any such analysis and so decided to do some of it on my own. I understand that this is mostly speculation, for even the bidders only have information of the consolidated bidding situation (and not that of other other individual bidders). Am posting my understanding of the bidding situation as of end of day 5. I will be keep a watch on how this shapes out. Various players will have different strategies, but it will be good to see, how close / far the final outcome is to what I have on my sheet.

Below is the circlewise, playerwise bidding situation as of end of day 5 (as per what I think).

Please click on the image to see it in larger size. 
1 - Player is bidding for the circle
0 - Player is not bidding for the circle



Above analysis is based on my interpretation of the standing of each player in different circles. I have also tried to think and incorporate what strategy / thought process each of them will have in various circles. I will tweak and modify these as the auction progresses, and the updates get announced. Intermittently, I might post it here as well.

Who will be the first beneficiary / victim of the telecom consolidation?

Disclaimer: All views expressed in this post are my personal views, and do not necessarily reflect the views of any entities, that I may be associated with. I have no financial investments in any of the companies mentioned. Use all information at your own risk.

On this day, when the Bharti-Zain deal has been finally sealed, I will like to propose a hypothesis related to the much-talked-about and inevitable consolidation in the Indian telecom industry. I am of the view, that, given the current scenario, among the bigger players, Idea Cellular will be the first one to cash out or merge with another player within the Indian market.


I believe, an Indian telecom player, needs to satisfy either of these 3 conditions, to sustain for medium-long term:

1. Be (comfortably) amongst the top 3 players, in terms of total subscribers
The latest (Feb '10) wireless subscriber figures available show the market share of the various players:

Vodafone	17.2%
Loop	0.5%
Idea / Spice	11.0%
Bharti	22.1%
Reliance	17.6%
HFCL	0.1%
Sistema	0.6%
Tata	11.2%
Aircel / Dishnet	6.2%
Stel	0.1%
Unitech	0.6%
MTNL	0.9%
BSNL	11.8%

Bharti, Vodafone and Reliance satisfy this particular condition.

2. Be consistently amongst the top 3 players, in terms of absolute market share growth
Comparing Feb '10 figures to Mar '09 figures shows the following growth in market share for the various players

Vodafone	-0.3%
Loop	-0.1%
Idea / Spice	0.0%
Bharti	-1.9%
Reliance	-0.9%
HFCL	0.0%
Sistema	0.4%
Tata	2.2%
Aircel / Dishnet	1.5%
Stel	0.1%
Unitech	0.6%
MTNL	-0.3%
BSNL	-1.5%

Tata (Docomo and other operations), Aircel and Unitech (Uninor) satisfy this condition.

3. Be amongst the top 3 players, in terms of percentage increase in market share
Comparing Feb '10 figures to Mar '09 figures shows the following percentage increase in market share for the various players (percentage increase = market share by end-Feb '10 / market share by end-Mar '09)

Vodafone	98%
Loop	89%
Idea / Spice	100%
Bharti	92%
Reliance	95%
HFCL	59%
Sistema	368%
Tata	125%
Aircel / Dishnet	131%
Stel	infinity
Unitech	infinity
MTNL	77%
BSNL	89%

Stel and Unitech are new players and had not started operations in Mar '09 (hence, the 'infinity' in the table against their names). Leaving these, the players that satisfy this condition are Sistema, Aircel and Tata.


So, as per my view, if any of these conditions are not being satisfied, it makes little sense for the player to remain in the industry. This is especially true when there are 13 players (and more entering as we speak) in a sector that is globally seen to have 4-6 players, on an average.


So, the top contenders for any kind of consolidation are Idea Cellular & BSNL (among the bigger players) and Loop, HFCL & MTNL (among the smaller players). I have kept Stel out of the consideration, since it is a very new player and many of my conditions might not exactly be applicable to it.


Among these 5 firms, BSNL and MTNL are government-owned entities, and given by what we have seen in the Indian context, the maximum that will happen with these companies is - merger of MTNL & BSNL and / or IPO of BSNL.


So, Idea Cellular looks to be the top contender that will be involved in a major consolidation event. Loop and HFCL might get gobbled up by some player on the way.


If one looks at Idea's performance in various circles in the period under consideration (Mar '09 - Feb '10), it's subscriber base has grown by 44% in the 11 months, same as the overall market growth rate. I would have expected it to grow at something above market growth rate, given it is the fifth largest player and someone like Vodafone (having 55% more subscribers than Idea) has grown at 41% in the same period.


Even this growth for Idea has come partly because of entry into newer circles (it was operating in 15 out of the 22 circles in Mar '09 and has since entered the remaining 7 circles).

A look at the market shares and the growth / decline in various circles shows some challenges that the company is facing

	Market share (Feb '10)	Market share change from Mar '09
Andhra Pradesh	13.9%	-2.7%
Assam	0.8%	0.8%
Bihar	8.5%	4.4%
Delhi	9.2%	-1.8%
Gujarat	17.4%	1.2%
Himachal Pradesh	5.2%	1.0%
Haryana	15.3%	-0.6%
J & K	0.7%	0.7%
Karnataka	7.1%	0.1%
Kerala	22.2%	-4.4%
Kolkata	2.9%	2.9%
Madhya Pradesh	23.2%	-1.2%
Maharashtra	21.7%	-2.2%
Mumbai	5.5%	1.6%
North East	0.3%	0.3%
Orissa	3.9%	3.9%
Punjab	16.4%	-0.3%
Rajasthan	7.0%	1.6%
Tamil Nadu	1.4%	1.4%
U.P.(E)	8.6%	1.2%
U.P.(W)	19.3%	-1.7%
West Bengal	2.5%	2.5%

1. The company has lost ground in most circles that used to be its major strongholds (e.g. Andhra Pradesh, Kerala, Madhya Pradesh, Maharashtra, U.P. (W))
2. A lot of the major gains have been in circles where operations have recently been launched (e.g. Kolkata, Orissa, Tamil Nadu, West Bengal). It is to be seen how much of this can be sustained going forward.


It has done well in some circles, such as Bihar, Gujarat, Mumbai, Rajasthan, U.P. (E). The growth, though, has mostly come on a much smaller base (except in Gujarat). This has enabled it to sustain it's overall market share in the country at 11.0% in the period under consideration. However, it is not clear how this share will be defended from hereon.


I understand that my analysis has entirely been based on the subscriber numbers and I have not looked at a lot of aspects that are internal. I have started from the assumption that consolidation is inevitable and the pricing pressures, number of subscribers gives a strong first-cut indication about the player conditions and potential future outlook.


I also want to propose, the different scenarios that might become the characteristic of the landmark consolidation event:
Scenario 1: One of the major foreign telecom companies acquiring significant shareholding from promoters (structure will become similar to Uninor). One possibility can also be Telekom Malaysia increasing it's stake.
Scenario 2: A major Indian industry group entering the telecom space through acquisition of a controlling stake
2.1 may be some one who gets a lot of money through selling an existing group company and wants to enter a different sector (e.g. recent diversification by the former Ranbaxy promoters)
OR
2.2 existing groups with diversification / ambitious growth plans (Mahindra? ITC?)
Scenario 3: A player like Tata, after increasing it's market share through organic route, wanting to catapult in the Top 3 through Idea's acquistion
Scenario 4: Idea merging with a smaller player (Aircel?) to retain / enhance it's falling market position.

I will keep an eye on this sector to see how things emerge. It will also be interesting to see, how much of the above was just my imagination, hard at work.

Warren Buffett's letter

Warren Buffett writes these famous annual letters to the shareholders of Berkshire Hathaway. Some interesting excerpts from his recent letter

"Our metrics for evaluating our managerial performance are displayed on the facing page. From the start, Charlie and I have believed in having a rational and unbending standard for measuring what we have – or havenot – accomplished. That keeps us from the temptation of seeing where the arrow of performance lands and then painting the bull’s eye around it.

I have been in dozens of board meetings in which acquisitions have been deliberated, often with the directors being instructed by high-priced investment bankers (are there any other kind?). Invariably, the bankers give the board a detailed assessment of the value of the company being purchased, with emphasis on why it is worth far more than its market price. In more than fifty years of board memberships, however, never have I heard the investment bankers (or management!) discuss the true value of what is being given. When a deal involved the issuance of the acquirer’s stock, they simply used market value to measure the cost. They did this even though they would have argued that the acquirer’s stock price was woefully inadequate – absolutely no indicator of its real value – had a takeover bid for the acquirer instead been the subject up for discussion.

When stock is the currency being contemplated in an acquisition and when directors are hearing from an advisor, it appears to me that there is only one way to get a rational and balanced discussion. Directors should hire a second advisor to make the case against the proposed acquisition, with its fee contingent on the deal not going through. Absent this drastic remedy, our recommendation in respect to the use of advisors remains: 'Don’t ask the barber whether you need a haircut.' "

M.B.A.

Interesting view from Matthew Stewart

"For companies, M.B.A. programs can be a way to outsource recruiting. Marvin Bower, McKinsey’s managing director from 1950 to 1967, was the first to understand this fact, and he built a legendary company around it. Through careful cultivation of the deans and judicious philanthropy, Bower secured a quasi-monopoly on Baker Scholars (the handful of top students at the Harvard Business School). Bower was not so foolish as to imagine that these scholars were of interest on account of the education they received. Rather, they were valuable because they were among the smartest, most ambitious, and best-connected individuals of their generation.Harvard had done him the favor of scouring the landscape, attracting and screening vast numbers of applicants, further testing those who matriculated, and then serving up the best and the brightest for Bower’s delectation. "

Addendum: I guess the chain continues, and to some level, various private equity firms and corporate houses (for senior management positions)  have outsourced their recruiting to firms like McKinsey.

I don't know if, I should stay

One of the better email forwards I received ...

-------------------
The name is good, the brand is big
But, the work I do is that of a pig.
My Future, or the Brand; what is my way?
I don't know if, I should stay.


To work, they have set their own way
Nobody will care to hear what I say.
My will be NULL, they wont change their way
I don't know if, I should stay.


The project is in a critical stage,
To do good work, this is the age.
This dilemma is worsening day by day
I don't know if, I should stay.


The money is not good, the place isn’t as great
And the decline is at a very rapid rate.
Should I go for the opportunity, or wait for loyalty pay
I don't know if, I should stay!


The managers don't know what they talk,
The team doesn't know where they walk.
That's a bad situation, what say?
I don't know if I should stay.


I can go to any other place
But, what if, I get the same disgrace?
I can't keep switching day by day
I don't know if, I should stay.

The -ves are more, the +ves are less
Then why have this unnecessary mess?
No more will I walk their way,
It's all done, I won't stay. 

To err by over-communicating

It is amazing how much we talk about communication, and how little we actually follow, what we preach.

I, along with a few others at work, had some things to be done. We required help from a lot of our colleagues and most of them were willing to help. It involved taking out time from their busy schedules and may be putting in some hours during the weekend.

The work got done and I conveniently forgot about these people who had helped us so much. There was no communication that was sent to them about how everything went and what was the result of the work that was put in by them.

When one of these people mailed me inquiring about the result, it was too embarrassing. They deserved to be part of the result - given that they were part of the process. I drafted a mail with the details w.r.t the results - and mailed it to everyone that was involved.

I understand that not everyone will be interested to the same extent in the results. But let's leave that to their discretion. They can always delete that mail as soon as they receive it. But let's give them that option. In my opinion, it is better to err on the side of over communication than not communicating enough.

Tomorrow is a new day

I keep saying to myself every once in a while ... that from tomorrow / from this instant, I would be a different person. I don't want to change everything that I am ... but only some of the things ... and mostly how I am internally. Even though most others might unanimously recommend a few things that I should change, they might not be agreeable to me. Sometimes, I am proud of a few of these things.

Anyways, the point of this post is that I have not been entirely successful in my above endeavour. You would have guessed that, given I have to revisit the thought so many time. I am hoping that writing it here might give the though another chance to get implemented in my life.

The motivations for such thoughts are pretty varied. Sometimes they come due things that happen with / at home, family, friends, work, colleagues etc. Sometimes, for no reason, you are faced with some existential questions in life and you start wondering where life is going.

I can list a lot of instances when such thoughts arise
... when someone you helped so much, starts pretending that you don't exist from the next day the work got over
... when a friend has time for everyone else, except you, and you give so much importance to this person
... when your time is not valued and everything has to happen as per the schedules of everyone else
... when things are not going exactly as plans in your work and you though its is not entirely your fault, you are being blamed for everything
... even after all this, you have no right to be angry with anyone for you would be fooling yourself if you are
... etc

The list can go on and on. But I guess, you get the point.

The idea is not to blabber all such things at this forum. The idea is to get your thoughts together and make a resolution to be different from tomorrow. It is almost 12 midnight and a new day is about to begin. From the time I wake up in the morning, I will be a different person, though you might not see much difference from the outside.

P.S. I know some of my acquaintances might mock at this post, if and when they read this. But I don't care (see I have started changing already :) ).

Consultant ke haath main Laalten

I know you are in a bank
Which is higher in the preference rank
To kya hua agar main ban gaya Consultant
Ab bhi Fin hi karta hain mujhe asal main exultant

Tumhara bank though hain well performing
Abhi nahin maana jaata hain, among the top ranking
Mujh Consultant ko apne bank ka de do ek engagement
Bana doonga tumhare bank ko best co. for asset management

Tumhara kaam hain Excel aur Number
Kuch logo ko daal sakta hain in deep slumber
Par main un main se nahin hoon, you can be sure
Mujhe to acha lagta hain Valuation - Ratios ya DCF pure

Tum bhi PPT banati ho aadha time
And PPT se hum earn karte hain apna nickel aur dime
Aoo kissi din milke, synergy-strategy pe discussion ho jaaye
Thoda Excel tum mujhe sikhaon, thoda think-cell main kho jaayein

Apna saath sahi jamega
Portfolio diversified nahin thamega
Agar market down ho jaaye, to meri Consulting kaam aa jayegi
Aur agar Consulting na chali meri, to tumhare bank se funding raise ho jaayegi

Tumhara Consultant haath main Laalten liye shaam tak tumhara intezaar karega

There is no room for cutbacks!

I sometimes wonder, where is the line between non-discretionary and discretionary expenses these days? Slowly, but surely, more items are crossing the line to the non-discretionary side. No wonder it gets harder to find expenses that could be done away with during a recession.

Food, telephone, electricity have been necessary items from long.
People get bored eating the same food – so, a visit to the restaurant once in a while cannot be done away with. And how can I resist the idea of a visit to a mall / shopping complex before the dinner in the restaurant? Oh! I almost forgot the movie before or after the dinner. This is the minimum one has to do to get replenished after a long hard working week. Also, no one can blame me for not spending time with family.

And just landline telephone is too old fashioned these days. Imagine what would happen if someone asks me my number, and I have no cell number to share. How can one live with that trauma for the rest of one’s life? Value added services are the soul of any mobile service. Do you think that I have bought this phone only for sending and receiving calls? Are you out of your mind? And now that I have a cell phone, whenever I have to pass some time, all my contact list is at my fingertips. No longer do I have to sit in a public transport vehicle just looking outside the window and waiting for my stop to come. There is so less time to catch up with all the friends, family – forget the recharge that I have to do every 10 days or so – it is worth it. Moreover, it does not look good if one does not wish others on their birthdays, anniversaries etc.

Electricity has been a boon to mankind. Now, I have a whole range of ‘essential’ electronic items that I can buy. Television has become a part of everyday life. And is it possible to live without air conditioners and heaters given the climate change? I refuse to argue on the essentials such as refrigerator, toasters, juicers, iron, washing machine, audio player etc. Add to these things like DVD player, exercise machine and so on, and you get things without which a home cannot be complete.

I have not even mentioned two modern day essentials – personal vehicles and a laptop – and the set of accessories which are (you got it right) ‘essential’ to the core.

Walking is so passé that unless my doctor / physical trainer tells me to do so, my first step outside my home would be in my car. And not any car – one which is the highest model available within that particular species. Even if it is not the most fuel efficient and our home could have done with a cheaper car, this is a matter of status and that has to be carefully built. Don’t you know how difficult it is to travel by public transport these days? I know that thousands travel that way, but also thousands travel by cars. Are the car owners mad to buy these vehicles? When they can, why can’e we?

Laptop with the best configuration, graphics card, speakers etc. is something important for the kids these days. They need to start getting exposure to such modern technology from the time they are a foetus. Have you heard of the 16Mbps connection that is available in the market? So, what if the only work I do on the internet is checking my mails (and most of it is spam) – anything below 16Mbps is just too slow. I don’t like to be restricted when it comes to the amount of downloads I can do in a month. So, the unlimited plan looks the ideal for me.

Given all this, it is but natural that recession hits poor souls like me, the most. As you can understand from above, I am just living hand to mouth and there is practically no scope for cutbacks. I am so careful about my expenses, that there is hardly any discretionary expense that I can enjoy or have some savings for the future.

Service

Jaise sansar 'par' hain, aise hi sharir, indriyan, mann aur buddhi bhi 'par' yaani doosre hi hain. Isliye karmyogi inko bhi apna na maankar, inki bhi seva karta hain.
(You should serve the body, sensory organs, the heart and the mind for they are separate from you.)

• Sharirko nidralu, aalsi, pramaadi, nikamma aur bhogi na banne dena, sharir ki seva hain. (To avoid letting the body become lethargic is the service to the body.)
• Indriyon ko saansarik bhogo main na lagne dena, indriyon ki seva hain. (To avoid letting the sensory organs become craving for worldly pleasures is the service to the sensory organs.)
• Mann ko kissika ahit sochne main, vishayon ke chintan main aur vyarth chintan main na lagne dena, mann ki seva hain. (To avoid letting the heart - think ill for others, think about worldly pleasures and take wasteful tensions - is the service to the heart.)
• Buddhi ko doosro ke kartavya par vichaar na karne dena, doosra kya karta hain, kya nahin - yeh na sochne dena, buddhi ki seva hain. (To avoid letting the mind think - about the responsibilities of others, about what others do and don't - is the service to the mind.)
  

Vaastav main sharir, indriyan, mann aur buddhi main mamta-aasakti na rakhna he inki sabse badi seva hain.
(Actually speaking, to not get attached / fond of the body, sensory organs, the heart and the mind is the greatest service to them.)

Excerpt from Sadhak Sanjivani - Swami Ramsukhdasji Maharaj