IIPM’s 36th Glorious Year of Academic Excellence The ‘Spicy’ saga is finally over, but can the astute Modi still fight it out on the Indian terrain? By surbhi chawla
Salman Khan is not the only man possessive about Katrina Kaif. The 59-year old Bhupendra Kumar Modi, Chairman, Spice Corp. is another admirer. “I’ve only sold my operations and subscriber base. The Spice brand, my brand ambassador Katrina Kaif, Spice Mobile (the handset arm), Spice VAS and retail are still very much with me to fuel my telecom dreams,” he told this magazine, on being asked whether his 40.8% stake sale in Spice Telecom to Idea Cellular signalled a dead end for his telecom ambitions.
Modi’s vehemence is not unfounded. Despite the neat price offering (a cool Rs.2,200 crore) that goes into his back pocket with this deal, it must have indeed been a difficult decision for this pioneer of India’s wireless ambitions to sell off his pet project. After all in 1995, when the first ever call over a GSM network was connected between Jyoti Basu (West Bengal CM at that time) in Kolkata and Sukh Ram (then Telecom Minister) in Delhi, it was Modi Telstra that facilitated the exchange. In fact, it was Modi’s then technical engineer, Naveen Kaul (now CEO of Spice Telecom), who connected the call. From thereon, in 1997, the duo spruced up the ‘Spice’ brand in Punjab and Karnataka.
Over the years, Modi partnered with a host of global telecom players – Alcatel, Telstra and more recently Telekom Malaysia (with a 39.2% stake in Spice Telecom) – for his telcom service biz.And the man who successfully waded through the licence-permit-quota raj in India, hand holding a host of MNCs to do their business in India, seems to have tired of the license game now. Highly placed sources in Spice say that the reason for Modi’s exit from Spice Telecom is that, “The service operator business, dictated by licence norms, comes with a lot of geographical limitations.” The multi-million dollar offer from Idea Cellular came at an opportune time and the hard-nosed negotiator that Modi is reputed to be, he dealt the cards amicably in his favour. As R.K. Gupta, MD, Taurus Mutual Fund says, “It is a good price to exit and marks the coming of age of Indian promoters and their willingness to exit businesses when they get the right price.” Notably, Modi sold off the telecom operations business and retained other group companies. Gupta feels that Modi not selling off the other businesses may be a function of the fact that the other businesses were either not doing as well or not fetching the right price. “In the near future Modi may look at exiting from other businesses as well,” predicts Gupta.
Gupta may well have a point. Way back in 2003, Modi decided to retire and enjoy the good life in his Beverly Hills villa, leaving the running of the Spice business to his wife and sons. But competition began coming into the Indian telecom mart ever since and Spice’s health deteriorated. Our man returned from his self-imposed retirement in 2005 and took full charge. Modi recalls, “I told them I will run the group myself and gave my children $20 million to build their own businesses.” Modi initiated a logo change, established a fresh connect with the youth, and made an effort to revitalise Spice Telecom. He succeeded in rebuilding the company’s brand connect, but could not do much for its mounting losses (for quarter ended 31st March 2008, the company incurred a net loss of Rs.365.06 million). Now, having sold off his stake in the reinvigorated Spice Telecom, he may be aspiring to simulate similar with the group’s leftover businesses viz. effecting a turnaround, waiting for the right price, negotiating hard, selling off and hey, it’s back to his plush Beverly Hills villa to lead the good life.
Interestingly, had Modi not sold off his stake, Spice Telecom had the potential to actually come out of its heavy losses. The losses, being inflicted due to operational inefficiencies could have improved by taking in more circles. The company had already procured four new circles – Delhi, Maharashtra, Andhra Pradesh and Haryana – in the recent round of new licenses given away by the government.
Given that Modi has cut his losses on Spice Telecom, he is now gung-ho on revitalising his other businesses viz. Spice Mobile, Spice VAS and Spice Retail (HotSpot). Spice Mobile, in particular, is a potential cash cow, just waiting to be unleashed. A few days ago, Modi went ahead to launch the ‘People Phone’, a mobile handset with lifetime prepaid connection at just Rs.599, targeting the rural markets in Punjab and Karnataka. However, next month onwards, Modi and Co. are gearing up for the phone’s nation-wide launch, in a bid to up Spice Mobile’s revenues to Rs.1,000 crore in this calendar year, against Rs.380 crore in 2007. Besides, they plan to launch a ‘Movie Phone’ by early 2009, which the company showcased at the Barcelona mobile fest this year. “We would be using a two forked approach for this business viz. targeting the low end customers, as also the top brass,” says Modi, explaining the thrust areas of Spice Mobile. In addition, the VAS division of Spice Corp. – also known as Cellebrum – provides a host of technology first services. The other wings of the group that are waiting for Modi’s Midas touch include HotSpot (that he wants to list by end 2008), Spice BPO services (Omnia) and Spice World (an entertainment & amusement park chain).
What’s more, before the dust had even settled down on his mega deal with Idea Cellular, Modi bowled another googly, making his plans public to invest the money from the stake sale into buying the 32% holding of the Indian promoters in Sony Entertainment Television (SET) for $320 million. In effect, he exited from one sunrise sector to enter another. With the spectacular success of the first season of IPL, Sony’s rough conditions in the Indian media business have softened considerably. Besides, Dus Ka Dum and Salman’s charisma is also working in Sony’s favour these days, propelling it back toward the number 3 slot that it enjoyed before the entry of players like NDTV Imagine and 9X.
“We would spice Sony up even further,” avers Modi confidently, adding that the decision to invest in SET is inspired by the latter’s entry into a slew of innovative technologies in communication entertainment like Blue Ray. But then, with competition in Indian media reaching gravity-defying proportions, will Modi be able to effectuate the spicing up of Sony? More so, when he has no core competence in the sector? Sources within Spice, on condition of anonymity, say that given Modi’s track record of not sticking with any business for a long time, SET should perhaps not look for a long term relationship with him. In any case, the Beverly Hills villa beckons...
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