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What is funding Telecom Malaysia's current round of rather aggressive investment in the Asian region?
In Ghana, the government nationalized the asset. In South Africa our partner in SBC, at the time (Southern Bell), wanted to sell. Telecom Malaysia decided to sell as well. Once we got out of Ghana and South Africa, there was no real sense in staying in Malawi and Guinea. We started to exit in 2004, and it should complete this year.

We have taken the proceeds from those investments and repopulated ourselves in Asia. We used it in Indonesia, Singapore, and Cambodia, where we bought 100%; we bought into Spice; and went to Pakistan. We have moved our concentration from Africa to Asia.

What problems did you face in Africa?
When you go to Africa, your DNA of that relationship is a government relationship, and the government keeps on changing. So it is very difficult to operate in that environment. The DNA in Asia is a commercial transaction where we can buy and we build, develop and so forth, and then we can decide what to do with the asset. From my perspective, it is always easier to be on a commercial basis.

Will the proceeds also be used for expansion?
No. In-country expansion and rollout will be done within the country. The businesses will have the capacity to do that. If they need help, TM is there to provide some funding.

How will the relationship of TM be with Spice, after the IPO?
We are committed to be equal partners. So in the IPO itself, the idea is to sell, maybe 20% of the business and proceeds from that sale of shares goes back into the company. It does not go into any of the shareholders. So from a 51:49 (Spice:TMI), we go down to 40.1% and 39.9%. And, 20% to the public.

Why are Indian operators not going global?
Whenever, you buy something for the first time, it is basically faith. It basically comes down to the fact that where do you see yourself in the future. From the early days, TM clearly saw itself as a regional player, as an international player. So we went into places like Africa, which was our ambition. It is going to be very difficult unless you have the clear ambition to become a regional player.

I have met Indian operators, outside India, but when going abroad, they are always looking for control that is very difficult to have these days. Since we started early, we were lucky to have control in most places. But telecom assets are becoming very scarce, valuations have gone up tremendously, even for mature markets the valuations are incredibly high.

So investing abroad is a leap of faith. You have to say that this is where I want to be and then you just got to go there. If you try to tiptoe, it will become difficult.

Is it an issue for TM to have control of Spice's operations?
No. It is not an issue. A good thing about the relationship with Modis is that the shareholders operate at a different level, and the management has to achieve its target. So far the relationship has been very clear, if the management does not perform or has not performed, we provide the tools to make sure they succeed. So, Spice is one company with two shareholders. It is not like the management works for Modis.

Why is TMI's portfolio limited to GSM?
We don't have any aversion to CDMA, just that we were weaned on GSM where our expertise is. Again, it is a question of scale. If I get into CDMA and I don't have CDMA elsewhere in the region, then it is much more difficult to get better prices, get better handset prices, and everything. And, GSM is evolving.

Could you have made a cheaper acquisition in India if you had looked at a CDMA player?
Globally, we have 20 odd mn subscribers on GSM. So if we had made a cheaper buy of a CDMA player, in the long run it could have been expensive because we don't know how to do CDMA. One of the reasons why GSM has become so successful is the handset, which people can keep changing.

And to be honest with you, India is the only place where CDMA mobile has been that successful. It has been tried out in Indonesia, but so far CDMA operators are getting no traction.

It would have been cheaper to come into the market earlier. What prompted TMI to the Spice acquisition?
Two things. We were in India earlier with Usha Martin in Calcutta. One of the key things, which caused us to refocus elsewhere, was the unclear regulatory framework. And, I think the government in the last two to three years has become more certain in terms of ownership and other issues.

The effort for the company in the short- to medium-term space is to ensure that our position as the number two operator is retained in Punjab.

In Karnataka, over the next 12 months you will see a big push to rollout the network. And, hopefully with the success we have had in Punjab, we can replicate that in Karnataka. I am also told that Spice has been voted the best customer service operator in those two circles, and we should be able to retain that.

How are you looking to rollout Spice's nationwide network?
We are looking at MVNO seriously. However, I don't believe the regulations are in place yet. There is a push for it, and Spice is also driving the push. As an organization, Spice is more marketing orientated.

Telecom Malaysia can provide technology, network rollout, and the rest of it. If we could go by the MVNO route, it would be much more efficient route for us, rather that trying to build 20 to 30 thousand towers.

What is your strategy for customer acquisition?
Even before we decide whether to go for rural or the big cities, Spice needs to have a clear view of its own destiny. And over the next few months you will see that crystallize. And where we are positioning ourselves is maybe as a leader of technology or services. So we will get-assuming the spectrum comes in to place-into 3G, WiMAX, and those areas. And, because it is a technological pipe thing, I would suspect, it would probably be to the A cities first. Rural is basically pure voice.

What has happened since TM has come in is basically a reassessment of our position in the market. Spice targeted the low end, primarily because they did not have the financing or the funding to offer anything else. But with TM in place, clearly there is a path forward.

What learning do you bring to India from your experiences in Sri Lanka and Bangladesh?
Our strength in these two markets is being a low-cost operator. In Sri Lank and Bangladesh, our average ARPU is $5. In India, it is very difficult for rates to go any lower. When you are operating in the $5 ARPU region, you have to use low-cost technology. That really is our experience more than anything else.

Any regulatory hurdles that you would like resolved in India?
More than anything else, I think the regulatory framework should be consistent. That is more important than looking at whether this structure should be dismantled or any other put up.

What synergy do you see between TM and Spice?
In terms of running the business, what we provide to Spice is really-from a procurement perspective-TM has mobile networks in nine countries. And, the vendors will now have to give Spice the prices which they give us. It is significantly less than what Spice was getting till now. In terms of value-added service as well, we buy a whole suite of services across properties. And to tag on to that is economical for Spice, rather than going at it themselves. So there are obvious benefits.

Alok Singh
aloksi@cybermedia.co.in