Companies & Sectors
BP seeks compensation from oil ministry for KG basin block
About 70% of the 1,949 square kilometres of the block falls in an area where DRDO and Navy exercises are conducted and has been classified as “Impact Zone” where oil and gas operations are not possible, BP said
UK’s BP plc has asked the Indian petroleum ministry to compensate for a Krishna Godavari basin block that it is being forced to surrender after defence ministry restrictions made oil and gas exploration impossible.
BP along with Reliance Industries had won the deep-sea KG-DWN-2005/2 or KG-D17 block in the seventh round of auction under New Exploration Licencing Policy (NELP) in 2008.
About 70% of the 1,949 square kilometres of the block falls in an area where DRDO and Navy exercises are conducted and has been classified as “Impact Zone” where oil and gas operations are not possible, BP wrote to the oil ministry on 27th May.
The block, it said, has “practically become a ‘No-Go’ zone for continuous exploration and subsequent development activities thereby preventing contractors from carrying out petroleum operations.”
BP vice-president (exploration) Alistair JA Bent wrote that the company appreciated that ministry of defence requirements for testing and carrying out exercises have led to the introduction of significant risk and high uncertainly beyond the control of contractors.
“We would therefore be prepared to relinquish the KG-DWN-2005/2 (KG-D17) block, but are happy to discuss possible options in lieu of such relinquishment,” BP said.
BP had written a similar letter in April.
Since the block size is small, flexibility to make any design changes to mitigate the impact of defence ministry requirements was severely restricted, it said.
BP said the block was in early stages of exploration and “any further exploration operations will be constrained as they need to be managed with respect to Naval and DRDO testing and exercises.”
“Even if any hydrocarbons are discovered, those cannot be produced as contractors (RIL-BP) would be prohibited from installing any permanent infrastructure in support of petroleum operation,” it added.
BP said due to the restrictions it will not be able to meet the minimum work commitment it had given at the time of winning the block.
The company had committed to do 2D and 3D seismic survey of the entire block.
“However, we are willing to consider an option to carry out a similar level of activities if equivalent new acreage is given in a mutually agreed area for exploration,” Bent wrote.
Previously, Cairn India had told the oil ministry that a large part of its KG basin block has become operationally infeasible because of new limitations imposed.
Cairn on 26th April wrote to the ministry that 35% of its KG-OSN-2009/3 block is “No-Go” area, which runs right through the block, leaving small portions on either side for exploration.


Telecom stocks on the upmove; Idea, RCom hit 52-week high
With concerns like moderating growth and regulatory overhangs still present, telecom stocks are moving up even on slightly positive news 
Shares of telecom companies Ideal Cellular (Idea), Reliance Communications (RCom) and Bharti Airtel (Airtel) have been on the upmove for a while now. On Wednesday Idea and RCom hit their 52-week high in morning trade.
This follows clarity on “free national roaming” by the sector regulator, Telecom Regulatory Authority of India (TRAI). While telecom minister Kapil Sibal has been suggesting to make national roaming completely free, the reduction in these charges by TRAI gives different signal. Apparently, the TRAI wants to allow mobile operators to continue charging for national roaming albeit with reduction in charges. More about it later.
There are also reports of the Arvind Mayaram Committee recommending increasing foreign direct investment (FDI) limit in telecom to 100% from current limit of 74%. According to a report in the Hindu Business Line, the Committee has also recommended allowing FDI in most sectors under the “automatic route”, thereby doing away with the need for government approval. 
Though these are just recommendations and the decision either to accept the recommendations or not would be taken by Department of Industrial Policy and Promotion (DIPP). However, this would prove beneficial for most of the telecom players who are reeling under mounting losses and regulatory uncertainty.
RCom closed up 2.38% at Rs126.7 on the BSE after hitting a 52-week high of Rs130.10. At the same time, Idea ended the day 4.52% up at Rs147.90 after touching its 52-week high of Rs150.65. Bharti Airtel, on the other hand, closed 2.83% up at Rs299.70 while the benchmark Sensex ended the day marginally higher at 19,245.
Data calling?
After the auction for 3G and BWA, I wrote that as fallout of 3G auction, call-based tariff will give way to data-based tariffs. I also suggested that after the 3G rollout, the possibility of massive increase in data-based services will give mobile operators an opportunity to create products and tariff plans with data-based services as the base product instead of voice-based services, thus unlocking new revenue segments.
However, not much has happened in past two years. Many mobile operators have launched 3G services, but either the tariff plans were not affordable for common mobile users or the data services lacked the required ‘punch’. The latter is true in most areas.
Earlier this year, Airtel, Vodafone and Idea increased rates for 2G by about 25% in order to reduce the gap between 2G and 3G data charges. 
On Tuesday, Vodafone, the second largest mobile network operator in India after Airtel by subscriber base, reduced 2G data tariff by 80% in selected circles. Vodafone cut rates to 2 paisa per KB from 10 paisa per KB for its customers from Karnataka, Uttar Pradesh (west), Madhya Pradesh and Chhattisgarh circles.
As of March 2013, Vodafone has about 33 lakh subscribers, out of its 3.73 crore subscribers using its 3G services, while about 60 lakh out of 4.3 crore subscribers of Airtel were using these services. Both Vodafone and Airtel earned 7% and 6.5% of their total revenues from data services during FY13.
What is interesting is while the world is moving towards 4G services, telecom operators in India are still trying to make money out of 2G services. Two years after the Indian government auctioned 3G spectrum and broadband and wireless access (BWA), and after spending crores of rupees on it, telecom operators showed some spark in 2012. Last year in May, Airtel, the country's largest telecom operator, slashed its tariff for 3G services by as much as 70% on select tariff plans.
However, Vodafone reducing data charges for 2G is not completely surprising. Vodafone does not have the licence to offer 3G services in the areas where it has reduced data tariff for 2G services. Earlier, Vodafone, Airtel and Idea tried to circumvent the 3G auction by collaborating and sharing 3G services with each other in circles where any one company does not have licence for the same. The case is sub-judice at present.
Impact of national roaming rate cut would be limited
Bringing more clarity on national roaming, the TRAI on Monday, reduced ceilings for calls and SMS made while roaming across the country. The regulator also provided flexibility to telecom operators to customise tariffs for national roamers through special tariff vouchers (STVs) and combo vouchers.
In 2007, TRAI had prescribed ceiling tariffs at Rs1.40 per minute for outgoing calls and Rs2.40 per minute for outgoing STD calls while on national roaming. These ceilings have been reduced to Re1 per minute and Rs1.5 per minute, respectively. The ceiling tariff for incoming calls on national roaming is reduced to Rs0.75 per minute from Rs1.75 per minute. Local SMS and SMS-STD are capped at Re1 per message and Rs1.5 per message. Incoming SMS would continue to remain free of any charge.
According to brokerages, in the context of prevalent concerns regarding “free-roaming”, the TRAI order on reducing call and SMS charges on national roaming is positive for the industry and provides flexibility to subscribers as well as operators. However, it would have miniscule impact on the bottom-lines of telecom operators.
“Assuming a domestic roaming contribution of around 4% and of that about 50% from incoming, incoming domestic roaming revenue contribution is estimated at 2%. A 25% decline in the tariff for this leg would result in a wireless revenue impact of 0.5% and wireless EBITDA impact of 1.3%," said a brokerage in a research note.
According to Religare Capital Markets, Vodafone, Airtel and Idea have seen traffic growth during the March quarter amidst range-bound realisations. "In our view, subscriber penetration is nearing saturation and sustainability of core voice growth remains a question. Further, we note that year-on-year growth is started trending into single digits. We remain cautious on the sector given our view on moderating growth and high expectations," it said in a research report.


EU regulator fines Ranbaxy, 8 others over Citalopram generic delay

The EU has imposed a fine of Euro 93.8 million on Danish pharmaceutical company Lundbeck and fines totalling Euro 52.2 million for delaying market entry of cheaper generic versions of Lundbeck’s branded citalopram


The European Commission (EU) today imposed a fine of Euro 146 million on nine pharma companies, including Ranbaxy Laboratories, for delaying market entry of cheaper generic versions of Danish company Lundbeck’s branded citalopram, a blockbuster anti-depressant.

According to information available on the EC website, Ranbaxy Laboratories has been fined Euro 10.32 million (over Rs80 crore).

“The European Commission has imposed a fine of Euro 93.8 million on Danish pharmaceutical company Lundbeck and fines totalling Euro 52.2 million on several producers of generic medicines,” EC said.

In 2002, Lundbeck agreed with each of these companies to delay the market entry of cheaper generic versions of Lundbeck’s branded citalopram, a blockbuster anti-depressant, it added.

“These agreements violated EU antitrust rules that prohibit anti-competitive agreements (Article 101 of the Treaty on the Functioning of the European Union — TFEU),” EC said.

The generic companies which have been fined are Alpharma (now part of Zoetis), Merck KGaA/Generics UK (Generics UK is now part of Mylan), Arrow (now part of Actavis), and Ranbaxy.

The fine on Ranbaxy Laboratories and Ranbaxy (UK), is Euro 1,03,23,000.

Commenting on the development, European Commission vice-president JoaquAlmunia (in charge of competition policy), said: “It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines.

“Agreements of this type directly harm patients and national health systems, which are already under tight budgetary constraints. The Commission will not tolerate such anticompetitive practices”.

Reacting to the fine, Ranbaxy Laboratories said: “Ranbaxy is disappointed with the decision by the European Commission to rule its patent settlement agreement with Lundbeck, covering the molecule Citalopram, anti-competitive, and intends to appeal the decision to the General Court of the European Union.”

These events took place over 10 years ago, and the company considers that the Commission has misunderstood the facts and misapplied the law, it said, adding it believed it has strong grounds of appeal.

Citalopram is a blockbuster anti-depressant medicine and was Lundbeck’s best-selling product at the time.

EC said after Lundbeck’s basic patent for the citalopram molecule had expired, it only held a number of related process patents which provided a more limited protection. Producers of cheaper, generic versions of citalopram therefore had the possibility to enter the market.


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