Companies & Sectors
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.


Mumbai property tax: Should you pay the tax, or wait for the HC to do something?
The last date for paying property tax in Mumbai is 30 June 2013.  The big question today is, should people pay their taxes or will the high court release its order in favour of many who will need to pay their taxes based on the flawed method of the Ready Reckoner
Moneylife Foundation has conducted several seminars and counselling sessions on the property tax issue affecting Mumbaikars, ever since the Municipal Corporation of Greater Mumbai (MCGM) sent out demands for its hefty revised property taxes with arrears for the past three years. Anomalies in computation and the hefty new taxes have caused serious concern for home and property owners. The new taxes carry the threat of hefty penalties for non-payment; however after public outrage over the short time allocated to pay up, the MCGM deferred tax payment deadline from March to June. 

It is now past mid-June and people are confused about what to do next. Several persons have called us at Moneylife and are calling property experts to find out whether they are obliged to pay by 30 June 2013. When the revised property tax notices were sent out, several organisations, including the Property Owners Association had announced plans to move court, but we find that none of the cases have been filed yet.
We spoke to several experts for their guidance on what people should do. Well known social activist Ashok Ravat tells us that he will be filing a Public Interest Litigation (PIL) in this regard on Friday and the hearing is expected to be on the following Monday. His advice is that people should pay their tax to the collectors (namely housing societies) but urge the management committees not to deposit the money with the MCGM until the due date, just in case there is a positive response from the courts.
Rajendra Thacker, a veteran of many public interest litigations and president of the Forum For Fast Justice, who has already filed the first petition on the increased property tax issue suggests that people should not hurry in paying their taxes at least for this month, even if it means risking a small penalty. His suggestion is to give the organisations planning litigation a little more time to file their cases. In his view, the penalty for not paying your tax before 30 June 2013 is 24% for a year, or 2% for a month. Mr Thacker says that if the Bombay High Court passes the order in favour of the citizens, it will be a blessing for all. Even if the hearings don’t happen before the 30th of June, it is bound to happen shortly thereafter and his group is hopeful that the court will consider their stand sympathetically and grant a stay.  But if the high court supports the BMC in this flawed method, Mumbaikars will need to pay the tax for their property with an additional 2% for the month as a penalty charge. But it is a risk worth taking, because if a stay is indeed granted later, then the money gets stuck with the MCGM until the case is resolved. He says, many more associations will be filing petitions and taking up this issue in a more serious manner by the end of this week.
The Property Owners’ Association, with its executive president BR Bhattad, is also contemplating to approach the high court on 24 June 2013 where Advocate Devrajan will be fighting the case on behalf of the Association.
Mumbaikars should collectively appeal to the municipal commissioner and take up the issue. Another important issue that needs to be brought to light is the massive increase in tax rates of those flats above 500 sq ft as well as about paying the hefty property tax bills, with arrears for the past three years. This is not a rational solution and more people need to voice out their opinions on objecting to pay the taxes for three years. Various associations should also write to the Standing Committee about the taxes levied on people who have purchased flats after the year 2004.
To recap Moneylife’s efforts with regard to property tax, we had our first talk on the increased burden that the property tax has caused on the people of Mumbai on 9 February 2013 with Ashok Ravat, a noted civic activist and founder-convener of the Shivaji Park Advanced Locality Movement and Advocate Godfrey Pimenta, President of Sahar Citizens Forum and an ardent RTI activist. Click here for more on the session.
This was followed by repeated one-to-one and group counselling sessions by Mr Ravat who guided Moneylife Foundation members on how the capital value method is flawed as it uses the Ready Reckoner value, which is not supposed to indicate real value. This method proposed by the BMC, has ‘intentional’ errors. The new system, the capital-value-based tax system is totally flawed and hasn’t been accepted by any other municipal corporation, except the BMC. 
We had another talk on how to best tackle the property tax issue by Mr Thacker, on 5 April 2013. Mr Thacker was kind enough to ask the attendees to send their bills (both old and new) to his office, so that he and his team could go further with its investigation into the matter. Click here to read more on the session.



nagesh kini

3 years ago

Jago Mumbaikar, Jago before it is too late. Join in with Ashok Ravat or Rajendra on their PIL.

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