Regulations
TRAI says no to discriminatory pricing, kills Free Basics
New Delhi : In a move seen as an endorsement of net neutrality and a setback to offerings such as Facebook's Free Basics and Airtel Zero, the telecom watchdog on Monday said no to discriminatory pricing of data content.
 
"No service provider shall offer or charge discriminatory tariffs for data services on the basis of content," the Telecom Regulatory Authority of India (TRAI) said in a much-awaited regulatory order.
 
"No service provider shall enter into any arrangement, agreement or contract, by whatever name called, with any person, natural or legal, that has the effect of discriminatory tariffs for data services being offered or charged to the consumer on the basis of content," the watchdog said.
 
Addressing a news conference after calling for the order to be published in the official Gazette, the watchdog chairman R.S. Sharma said the basic premise based on which the new norm has been notified is to make the Internet available to a large number of people. 
 
"We have also kept provision for exception in grave emergencies," he said.
 
Sharma also sought to make a difference between the term "differential pricing" or "zero rating" that is normally used vis-a-vis "discriminatory pricing". "We have used the term discriminatory pricing. Essentially we are saying that Internet pipe should be agnostic to packets," he said.
 
"We have also kept provision for exception in grave emergencies. We have also made exception in case of closed networks, which are not Internet. Anything on Internet cannot be differentially priced. That is the broad point we have made."
 
Crucial to the issue of Net neutrality, differential pricing or zero-rating is a practice where Internet service providers do not take into account the content downloaded by subscribers from some platforms while computing their usage tariff. These become free or differentially priced.
 
Those batting for Net neutrality want a uniformity in such tariff. But those on the other side of the debate feel this may be impossible because service providers have to invest huge amounts of money on infrastructure and different bandwidths call for different level of investments.
 
This appears to have been addressed by the watchdog.
 
"No service provider shall charge differential charges based on source, destination, application and content," the TRAI chairman said.
 
The watchdog has also called for a fine of Rs.50,000 per day for each act of contravention, subject to a cap of Rs.50 lakh.
 
The watchdog's stand was much awaited in the light of Free Basics service and Airtel Zero, which are apps promising access to the Internet by providing them a range of some basic services for free such as news, health, travel, jobs, sports, communication and other information.
 
The issue ran into a controversy as well when the major part of the responses to a TRAI paper calling for comments on Net neutrality only spoke about differential pricing and support for Free Basics. 
 
The watchdog did not take kindly to it -- saying most of the responses did not address the larger issue -- and shot a stern letter to Facebook.
 
The watchdog tended to agree that differential pricing had the potential to expand and accelerate Internet access, and said as much in its order.
 
"On the other hand, differential tariffs result in classification of subscribers based on content they want to access," it said, adding this could go against the non-discriminatory tariff, disadvantage small content providers, create entry barriers and and stifle innovation.
 
The watchdog also said differential pricing violates the basic principles of the Internet, turn the service providers into gatekeepers, which, in turn, goes against the freedom of speech, expression and media pluralism.
 
Applauding TRAI's move, Software Freedom Law Centre, India, said: "Differential pricing runs counter to this fundamental premise, which has had no small role to play in the Internet's explosive growth. In this context, TRAI's latest Regulations are a big step in the right direction, and secure India a position amongst the select few nations to have accorded legislative respect for the principle of network neutrality."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Tourism ministry launches infoline in 12 languages
New Delhi : The tourism ministry on Monday launched a round-the-clock toll-free infoline in 12 international languages for the benefit of both international and domestic tourists.
 
Apart from English and Hindi, the infoline will provide relevant information to tourists in Arabic, French, German, Italian, Spanish, Japanese, Korean, Chinese, Portuguese and Russia. 
 
The callers can avail the service on 1800111363 or on a short code 1363. Calls made by international and domestic tourists to the number while in India will be free of charge. 
 
Launching the service at a function here, Minister of State for Tourism and Culture Mahesh Sharma said that an 'Incredible India Mobile App' will soon be launched to help tourists. 
 
“The multilingual infoline will provide information to domestic and international tourists. It will also give advice to callers on action to be taken during times of distress while travelling in India and on the need to alert authorities concerned,” Sharma said.
 
International tourists in India and callers who speak the aforesaid languages will be directed to call agents proficient in the language concerned.
 
The 'Incredible India' website is also being updated to make it more tourist-friendly, a ministry release said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Value Stocks Vs Value Traps
Value investors scour thousands of stocks to find bargains, also known as value stocks, which they believe are undervalued by the market. However, at the same time, there are value traps, which attract value buyers due to their cheap valuations; however its stock price never recovers
 
Value investing is a strategy of identifying stocks that trade for less than their intrinsic value. Value investors would scour thousands of stocks to find bargains, also known as value stocks, which they believe are undervalued by the market. The standard approach is to compare the market price of a stock with its fundamentals, using valuation ratios such as the price-to-earnings (P/E) ratio, or the price-to-book (P/B) ratio. 
 
Consider an example to illustrate the use of the P/E ratio to identify value stocks. The P/E ratio of a stock is calculated by dividing market price of the share by its trailing 12 months’ earnings per share. As on 22 January 2016, the average P/E ratio of the NIFTY stocks was around 20. It means that the average NIFTY stock was trading at around 20 times its earnings per share. At the same time, the share price for Punjab National Bank (PNB), for example, was Rs92.55 with a trailing 12-month earnings per share of Rs12.34. Therefore, the P/E ratio for the PNB scrip was 7.5 (92.55/12.34 =7.5). The PNB stock seems cheap as it is trading at just 7.5 times its earnings per share. In fact, we can extend this reasoning and claim that since a typical NIFTY stock trades at 20 times its earnings per share, the market price of the PNB stock should have been around Rs246 (20x12.34 =246). Therefore, the PNB stock appears to be quite a bargain at Rs92.55. 
 
The concept of value investing is not only logically appealing, but it is also supported by the works of leading academic researchers such as Eugene Fama, a Nobel laureate in economics. The lure of beating the market by finding cheap stocks is so compelling that value investing has transformed into a modern-era gold rush, endorsed by an army of investors and experts. It doesn’t hurt that some of the most successful investors of our times, from Warren Buffett to Rakesh Jhunjhunwala, consider value investing as their key to success. Computing valuation ratios for a large number of stocks may be tedious for most retail investors. To put it in perspective, there are more than 5,500 stocks listed on the BSE alone. Fortunately, there are free websites that screen value stocks from the set all listed stocks. For example, one may visit the website Screener.in, and instantly search for all the stocks that have a P/E ratio less than 10.
 
But if it is so simple and widely practised, why aren’t most of us making money by buying cheap stocks? Sometimes when a company’s share is trading at very low P/E values, it is doing so for a good reason — because its business holds little promise for the future. Such stocks, also known as value traps, would attract value buyers due to their cheap valuations; however the stock prices never recover, and may even fall in the future. Identifying value traps is tricky, even for some of the smartest investors. In 2012, faced with intense competition, the shares of British retail giant Tesco began to slide. Sensing very attractive valuations, Warren Buffett-led Berkshire Hathaway invested heavily in Tesco, eventually becoming its third largest shareholder. However, Tesco’s share price did not recover, and Berkshire Hathaway was forced to liquidate its stake in Tesco at a loss of $444 million. Fortunately, a careful analysis can reveal red flags that indicate a potential value trap. Even if a company’s valuation seems very low, investors should avoid its stock if the company has unsustainably high level of debt, extremely low margins, excessive competition, or when the industry itself is in a steady decline. 
 
Another common mistake is comparing valuation ratios of stocks belonging to different industries. The P/E ratios can vary considerably across different industries. Currently, the average P/E ratio for FMCG stocks is around 41, whereas the same for banking stocks is around 19. This means that ITC, with its current P/E ratio of 25.5, is undervalued relative to its peers in the FMCG industry, whereas IndusInd Bank, with a P/E ratio of 23.3, is overvalued relative to other banking stocks.
 
Investors must also recognize a basic flaw in the valuation ratios; while the price of the stock changes constantly in response to new developments; the fundamentals such as earnings are only updated quarterly. For example, on 28 May 2015 Nestle India stock traded at Rs7,099. At the time, as per the most recent quarterly results declared for March 2015, the trailing 12-months earnings per share for Nestle India was Rs132, leading to a P/E ratio of 53.7 (7099/132=53.7). While the P/E ratio of 53.7 is healthy, it is not unusually high for the FMCG industry. On 31 May 2015, a criminal complaint was filed against Nestle India for having high levels of lead in its flagship product, Maggi noodles. The Food Safety and Standards Authority of India (FSSAI) banned Maggi noodles, terming them “unsafe and hazardous for human consumption”. Within 10 days, the stock price of Nestle India fell from Rs7,099 to Rs5,504 per share, and the P/E ratio fell from 53.7 to 41.6 (5,504/132 = 41.6). Did this mean that the Nestle India stock had suddenly become cheap? The ban on Maggi noodles was damaging for Nestle India’s stock price, but it was also detrimental for its future earnings prospects. However, while the price (numerator) had immediately fallen in response to the news, the trailing 12-month earnings per share (denominator) remained the same until Nestle India reported its next quarterly results on 30 July 2015. In the quarter ending June 2015, Nestle India reported a loss of Rs64 crore, its first quarterly loss in past 15 years. With this reduction in its earnings, the P/E ratio increased to 68.22 on 30 July 2015, and the stock price of Nestle India no longer looked undervalued relative to its earnings.
 
(Prateek Sharma is Assistant Professor of Finance at IMT, Ghaziabad)

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COMMENTS

shriram9319

8 months ago

for a bottom -up investor leastly bothers industry Outlook and if one small cap has an sustainable economic moat then it should be immediately grabbed

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