Too early to launch 4G given ecosystem: Videocon Telecom

Videocon Industries plans to demerge its telecom business Videocon Telecom Ltd into six new group companies by circles. In an interview to CNBC-TV18, Arvind Bali, Director & CEO at Videocon Telecom spoke about the latest happenings in his company and sector.Below is the verbatim transcript of Arvind Bali's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: Is it true that you would be looking to do this demerger and if yes, what would the rationale be?A: In telecom, we are holding some spectrums and after this spectrum sharing and spectrum trading and mergers & acquisitions (M&A) guidelines, there is a lot of interest as far as the spectrums are concerned and also how companies can combined together those factors do the best possible thing.So because we are holding liberalised spectrum 1800, which is the best for 4G LTE service, so a lot of companies are showing interest. There are various possibilities of spectrum sharing, spectrum trading, there are some circles one operator is interested, another circle another operator is interested so we are in discussion mode and we are evaluating all those possibilities and just see how overall in telecom we will start doing better.Latha: Which circles would you like to be interested in keep all the spectrum to yourself and in which spectrum or which circles are you talking to people?A: When we see Videocon Telecom, we are into various business verticals like we are into GSM services, we are also into long-distance, international long distance (ILD) business, we are also into enterprise side, so all those verticals are growing.Particularly, when we talk about GSM -- we are holding 7 circles. Out of those 4 circles, we are doing very well. We are among the top three when it comes to market acquisitions, those are Punjab, Haryana and Gujarat. When it comes to Uttar Pradesh (UP) and Bihar, there we got the spectrum only in March 2013. From that time we had a modest start.When we started those circles, we realised that at that stage, it doesn’t make sense to invest in 2G because 4G was something which was on the block and when we were evaluating 4G, we realised that it is too early to launch 4G because ecosystem as far as customers having handsets -- there was limitation.So we have been just running those circles at a very small scale. We have got some very small customer base over there. So those are the circles which are also very valuable for all other operators because they are representing almost 22 percent of total revenue growth or revenue base, which is there. So those are the circles where mostly operators are interested and they are looking at all possible ways how our spectrum can be utilised, can it be utilised by spectrum sharing or spectrum trading -- when they are talking about spectrum trading, there is a cost involved. Then this M&A option comes that you will demerge into smaller companies and then merge it. So we get an advantage.Sonia: Can you give us an indication of what the valuation could be, what could the enterprise value be of the spectrum that you own?A: No, at this  stage, it is very difficult because discussions are just on but main thing is in spectrum -- there are 1800 spectrum and there are 900 spectrum. So base price based on some basis, the valuation of the spectrum is decided. In our case, in last auction 900 was the only spectrum in our circle which had the complete 6-7 megahertz blocks so 1800 pricing has to be now based on those 900 but 1800 in last auction was in small segment which was not contiguous. It has taken some time to convince customers or the partners like what should be the right valuation.