Parsvnath telecom fray – tough call to connect

To cash in on low mobile penetration and hopes of number portability introduction, real estate firm Parsvnath Developers has applied for a pan-India ‘Unified Access Services’ licence to offer 2G GSM services along with IPTV, Wi-max, Broadband, Internet among others.

Most probably, Parsvnath will form a SPV for the venture in which it would hold 26% stake. It would collaborate with a foreign telecom player holding 51% stake while the rest 23% stake would be with financial investors.

Parsvnath wants to concentrate on smaller tier II cities and rural areas for mobile telephony as these have a lower penetration in comparision to metros. It can draw synergies from its presence in 48 cities in 17 states across India.

But the biggest roadblock still remains the issue of spectrum allocation. The issue may be fully resolved only once defence ministry vacates 35Mhz of spectrum. Also, existing telecom operators are demanding cap on number of players in a circle.

Though Parsvnath could gain in a sense since there are signs of slowdown in realty sector and diversification would help. It could also gain by sharing telecom towers and other infrastructure with existing operators.

But the success of venture could be doubted upon since the telecom industry is dominated by top conglomerates in Indian business – Birla, Tata, Ambani and Mittal. They have the financial, political clout to take advantage of and have established a considerable presence in the industry.

However, a pan-India telecom licence costs around Rs. 1500 crore and thereafter the huge capital expenses of putting up the necessary infrastructure. With a market cap of Rs.6000 crore and Rs.1535 crore revenues, it would require a lot of funding putting strain on company’s financials.

Even then being a late entrant in this industry, it would be a tough task for Parsvnath to establish a firm foothold in this growing industry.