Big Bang In Broadband

Competition policy

The emphasis in competition policy, if there must be one, should be on the scope for innovation

Hikal Chemicals

Hikal's acquisition of Novartis' plant at Panoli in Gujarat will strengthen its manufacturing capacity for technical grade materials and formulations

Having skipped the first infotech wave, Reliance, through its BSES acquisition, intends to grab with both hands the chance to participate in the second wave, called the broadband revolution

The Reliance group can scarcely be accused of lacking vision. Nevertheless, like most of the other mainstream business houses, (the Tatas being a notable exception), it failed to foresee the potential in information technology. To most analysts the reluctance to climb aboard the software bandwagon was somewhat of a mystery because most of the software work done by Indian companies is project management, and there's no denying that the Reliance management has built up formidable skills in project management. But the attempt to acquire BSES changes all that.

That's because the BSES acquisition means just one thing -- the lure of broadband. BSES' optic fibre network will enable it to deliver broadband services through its Internet service provider (ISP). BSES is also setting up its own Rs 1,400 km optic fibre network in Maharashtra. That ties in neatly with Reliance's own national broadband network, which is expected to be linked up with one of the transcontinental, submerged optic fibre networks.

Reliance is putting a nationwide optic fibre network at a cost of nearly Rs 6,000-10,000 crore. It plans to cover Karnataka, Gujarat, Tamil Nadu and Andhra Pradesh in the first phase, following it up with New Delhi, Madhya Pradesh, Rajasthan and Haryana in the next phase.

BSES Telecom, a BSES unit, has already laid 200 km of the planned network and will be laying another 400 km by the end of this year.

BSES chairman RV Shahi told this paper that BSES' biggest advantage will be its extensive use of optic fibre technology. This means a larger bandwidth resulting in better and quicker receptivity. "Every consumer will have 2 million bytes per second of bandwidth, the highest any ISP can offer," Shahi said.

Analysts point that BSES is the only ISP in the country to have a full optic fibre cable network. "We also acquired 'A' category licences whereby we could spread in other towns and cities. This will be gradually done. We have also set up a joint venture with Sriven Multitech which will develop the touch-screen kiosks, to be set up in different parts of the country.

"This will make the facilities accessible to the masses," Shahi said.

It is BSES' broadband future which gives it a historical price-earning ratio (PE) of 11.6, compared with Tata Power's 3.2.

The rules of the Internet game are being re-written by the introduction of broadband. The immediate effect on the Net economy will be that today's dominant portals will find themselves being challenged by new players who have embraced broadband. It gives those who missed the narrowband revolution a second chance. The Reliance group is grabbing that opportunity with both hands.

Competition policy

The emphasis in competition policy, if there must be one, should be on the scope for innovation

Whatever shape is ultimately taken by competition policy, those in charge of framing that law should keep in mind the changes brought about in competition by the introduction of the Internet.

In the US, scanners attached to mobile phones can scan the bar codes of items stocked in supermarkets and give a list of prices of similar items at other shops. The point is, in the networked world competition is just a click away. One of the textbook requirements for perfect competition is access to information.

The Net is as close to perfect knowledge as we're going to get. The other point is that while the Microsoft case will be cited as one reason for a competition policy, there are those who argue that the pace of technological change, especially the proliferation of Net-enabled devices and the emergence of open-source software such as Linux, will make Microsoft's monopoly over the operating system a thing of the past. These factors should make the regulators think long and hard before framing a competition policy.

Finally, the emphasis in competition policy, if there must be one, should be on the scope for innovation. The allegation against Microsoft has been that it stifles innovation. And in a knowledge economy, stifling innovation is a cardinal sin.

Unfortunately, the indications are that the committee has taken a thoroughly Old Economy view of the matter. For instance, taking asset size as the criterion for reporting M&As to the commission is silly in an era when most of a company's assets are intangible.

Hikal Chemicals

Hikal's acquisition of Novartis' plant at Panoli in Gujarat will strengthen its manufacturing capacity for technical grade materials and formulations

The turnaround at Hikal Chemicals (net profit of Rs 17.27 crore in 1900-000 against loss of RS 2.74 crore) came about after the commissioning of its new plant at Taloja for thiabendazole (a fungicide). The company has a 100 per cent buyback agreement (for 10 years) with Merck & Co, US, for the product. And is today the only producer of thiabendazole in the world.

Hikal has also entered into a long-term arrangement for supply of paracumidine, a key intermediate for AgrEvo India's herbicide, Isoproturon. To further consolidate its position in the agrochemical's segment, it acquired Novartis' plant at Panoli in Gujarat, which manufactures quinalphos, an organophosphorous insecticide and its intermediates. The acquisition will help Hikal to strengthen its manufacturing capacity for technical grade materials and formulations.

A tie-up with multinationals and enhanced product portfolio will bring in the growth in the near-term.

(With contribution from Rajiv Naidu and Rakesh Sharma)