Archive for January, 2009

Petrobras – a shining light for oil service firms

logo_petrobrasWith the recent announcement that Petrobras (NYSE – PBR) would raise its five-year investment plan by 55%, knock on effects have been felt throughout the oil services industry & have spurred analysts to look at Brazil as one of the emerging markets that may lead the way in recovery from the current financial crisis. “Petrobras’s long awaited 5 year plan contains good news for service companies active in Brazil,” Keith Morris, analyst at Evolution Securities said in a research note.

State controlled Petrobras, announced a crisis-busting investment plan Friday to spend more than $174 billion over the next five years, much of it for deep-water oil and gas exploration. The investment period runs through to 2013 and represents a rise of 55% over the $112.4 billion the company had originally planned to spend on development between 2008 and 2012.

This investment is “very robust and very important for the continuity of Petrobras’s growth,” José Sergio Gabrielli, the company’s chief executive, told reporters on Friday at a news conference in Rio de Janeiro.

$10 billion of this capital would come from the BNDES national development bank with a 30-year repayment term. The bank has been stepping in and offering credit under favorable terms to local businesses, after international lenders pulled out due to the global financial crisis. BNDES has so far committed to bankrolling $11.9 billion of Petrobras’s investment budget this year, with an additional $5 billion coming from international banks. Chief Financial Officer Almir Barbassa said that the oil giant  will continue to work on cost cutting measures in order to free up as much as $4 billion annually in the next two years for investments and in an attempt to prevent debt from swelling. The company will seek to keep its investment-grade debt rating as it invests $174.4 billion in the next five years, he said.

Petrobras has based its 2009-2013 plan on Brent crude at $42 a barrel, with financing needs for 2009year based on Brent at $37 a barrel. Brent futures for March delivery are currently trading at a median of $47 a barrel the last two weeks, although the price was as low at $36 last month. Petrobas has set total investment for 2009 at $28.6bn. With Brent at $37, this requires finance of $18.1bn, of which Petrobras has already secured $16.9bn, including the $11.9bn from the BNDES. As previously discussed in India & China move to secure oil reserves , the Chinese development bank approached Petrobras with a $10Bn offer in December, it is unclear if the Chinese offer is part of PBR’s calculations or not.     

Today, according to Bloomberg, Petrobras has stated that it is suspending a planned bond sale on the international markets, as there is no need to raise more funds in 2009 after securing $17.5 billion in financing from Brazil’s state development bank and other lenders. Borrowing costs have climbed after the global credit crisis led investors to shun emerging-market debt and oil slumped 72 percent from a record $147.27 a barrel on July 11.

“We want the financial market to adjust the costs to the risks Petrobras has,” Gabrielli, 59, said in an interview with Bloomberg TV in New York yesterday. “Petrobras’s risk curve needs to be more realistic than it is today. We need to observe the market conditions and go to the market when they are more favorable.”

Petrobras and partners including Repsol (NYSE – REP) and BG Group (LSE – BG) discovered vast deposits of oil under more than 4,000 meters of water, rock and salt in 2007. The deposits are at previously untapped depths and will be costly to extract, they hold an estimated 8 billion to 12 billion barrels of oil, according to Petrobras figures. It is thought that other reserves may be nearby in other as yet unexplored blocks. The flagship Tupi field is estimated to hold between 5 to 8 billion barrels of light crude oil and is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000, whilst a second fin, Iara, is estimated to run between 2 to 4 billion barrels.

Companies with experience in deepwater and subsea engineering are expected to be key beneficiaries from the finds, this already being reflected in the market, with companies such as Swiss based Transocean (NYSE – RIG) showing an uptick in share price. Likewise in London, oil pipe manufacturer rose by more than 12% following Fridays announcement by PBR, which is Wellstreams largest customer. Analysts have noted that interest is running back into oilk service firms globally in the last week, with Norwegian engineering firm Acergy registering a 4% gain, bucking the market trend.

This could also be good news for US firms that are involved in South American finds, Devon Energy (NYSE – DVN) , the largest indepandent oil firm in the US, recently signed a long lease deal for the deep sea exploration vessel Deepwater Discovery from Transocean. Devon has had pre-salt production running in Brazil since 2007 on their Polvo field & have an additional 9 blocks that are waiting to be fully surveyed. One of these, the Wahoo prospect is currently drilling at approximately 18,600 feet. Devon & its partner partners plan to conduct additional evaluations of the well when it reaches its total targeted depth of approximately 20,000 feet.

“We are encouraged by what we have seen so far in the Wahoo well and look forward to the results of additional testing and evaluation,” said Stephen J. Hadden, senior vice president of exploration and production. “Brazil has been the site of some of the most promising recent deepwater oil discoveries in the world. Devon has an active exploration program under way in Brazil with other very attractive prospects nearing the drilling stage.”

The spending plan “means there’s going to be a lot of investment for the oil and gas sector in coming years,” said Roberto Lampl, who helps manage $12 billion in emerging-market assets at ING Investment Management in The Hague. Foreign direct investment “was still pretty high for December and that’s definitely positive.” “On a relative basis we see Brazil as very attractively valued and we are fairly positive on the country and various companies,” said Lampl, who moved to an “overweight” position on Brazilian stocks at the beginning of this year.

Brazil received a record $45.1 billion in foreign direct investment in 2008, the central bank said in recent report, FDI surged to $8.1 billion in December, more than twice the $3.1 billion median estimated by economists surveyed by Bloombergs.

Advertisements

Serbia seeks to liberalise fixed line market in 2009

Lack of competition for fixed line monopoly Telekom Srbija has left Serbs complaining of a poor quality service, which is partly analogue, partly digital, with many households still sharing lines, so that only one can use the phone at the same time.  According to the regulator’s figures, landline penetration was around 38 percent in 2007, while GSM penetration was almost 112 percent, a discrepancy explained by long waiting times for landlines to be installed.

Presently, only the mobile sector in Serbia is fully liberalised , earning an estimated €1.8 billion in turnover. Norway’s Telenor bought local operator Mobi 63 in 2006 for €1.5 billion euros & currently services approximately 39% (3 million users) of the market, while Mobilkom, the mobile telephony arm of Telekom Austria , paid €320 million to acquire the third mobile licence bringing an approximate market share of 5% . The remainder is controlled by Telekom Srbjia’s mobile arm MTS which claims more than 5.6 million subscribers, as of November 2008, Telekom is a joint venture 80% owned by the government, with the remainder held by Greco-German OTE Net (Deutsche Telecom recently acquired a 25% in the Greek carrier for €3.2 billion)

Serbia made the first moves towards opening the telecoms market in 2005, by establishing an independent regulatory body, but the process has been stalled by political turmoil caused by frequent elections and long periods without a government. The projected opening of the landline market in 2009,  will come a year before the government launches an expected initial public offering for Telekom Srbija. With the IPO having been postponed postponed to 2010 due to the global financial turmoil, Telekom Srbija raised prices in November, in all too familiar bid to attempt to expand its network before competition arrives. Telekom, who are being advised by Morgan Stanley on the offering,  is currently estimated to be worth €2 billion, based on 2006 accounts. On completion, the new Telekom will be dual listed on the Belgrade & London Stock Exchanges.

Minister of Telecoms Jasna Matic has said to local press that she expects ‘several’ companies to participate in the tender for the second fixed line telephony licence, scheduled for the summer. In a statement Matic said that the introduction of competition to the fixed line telephony scene would lead to ‘expedient improvement’ of the market. She added that a tender for fixed wireless telephony concessions covering rural areas was also in the pipeline. At present no companies have expressly come forward to state participation, however a roll of contenders is not difficult to imagine.

Deutsche Telecom has a track record of buying into Balkan operators, with branded operations already running in Hungary, Croatia, Montenegro, Macedonia & Greece (via OTE). Greek operators Cosmote has also been making inroads, having picked up licences in Romania & Bulgaria, however they may be put off by the level of capital expenditure required to compete effectively. Telekom Austria are also a likely competitor for a fixed line licence, as they are already active in country via Mobilkom & have ongoing operations in Slovenia, Croatia, Macedonia & Bulgaria. More interesting to me is the opportunity to roll out fixed wireless broadband services in to rural areas, something that has been ongoing in recent EU entrants such as Slovakia, Croatia & Slovenia, independent telcos such as Swiss based  WiMAX Telecom, which operates rural infrastructure in Austria as well as the aforementioned, could form part of a larger bid with Telekom Austria. As ever, a watching brief.

Qatar to continue double digit growth as LNG buoys economy

qatar_gas1_full

As the financial crisis continues to reach around the globe leaving most economies reeling in its wake, the Gulf state of Qatar is hoping that its substantial natural gas reserves will cushion it from the worst of the fallout. While other gulf economies face slowing growth rates, Qatar hopes that its vast gas reserves will allow it to weather the storm more easily than its regional neighbours.

“Selling gas gives a much better outlook for Qatar than the rest of the GCC countries,” says Philippe Dauba-Pantanacce, a senior economist at Standard Chartered Bank. “They have been doing a lot of heavy investments in terms of gas production, and they are yielding the benefits now.”

Qatar boasts the third largest gas reserves in the world after Russia and Iran, and is the world’s largest exporter of liquified natural gas (LNG). Experts predict that Qatar’s economy could grow by more than 10% in 2009, bolstered by projected strong expansion of gas exports and assisted by a potential drop in inflation. Such growth seems particularly remarkable when one considers that GDP growth in the United Arab Emirates,  is projected to dip under 3%.

“Qatar’s economic growth will be the strongest in the region by some margin,” insists Simon Williams, HSBC’s chief Middle East economist. “The industrialisation process in Qatar is advanced, the infrastructure build-out programme has momentum, and financing is secured for many of the key projects.”

This growth is expected to help Qatar push forward with in excess of $222bn worth of projects, as it strives to move away from its dependency on energy and become a ‘knowledge’ economy.

While the oil price collapse has weighed heavily on other Gulf states partially dependant on oil exports for their revenues, economists say the slide will have no impact on Qatar’s gas exports, which are based on long-term, locked-in price contracts. Most of its growing LNG exports are sold on long-term contracts, many linked to a lower reference oil price than currently projected for 2009, and are thus not expected to be adversely affected by the current slump in oil prices, according to analysts. With new LNG facilities scheduled to come on stream from producers RasGas and QatarGas, Qatar’s aim is to more than double its production capacity of 77 million tonnes per year by 2010.

Qatar is expected to print the strongest GCC current account surplus in 2009, above 30% of GDP. The recently completed $5Bn Dolphin Project, a good example of a “cash cow” project for the island nation, has now started pumping gas from Qatar to the UAE via an undersea pipeline.  The UAE has the fastest growing gas demand in the Middle East due to a rapid expansion in power and industrial projects and its gradual switch to gas as a cleaner source of energy. From around 21.2 billion cubic metres in 2000, the UAE’s gas demand surged to 34.1 billion cubic metres in 2005 and is projected to soar to 42.9 billion cubic metres in 2010, to 51.9 billion cubic metres in 2015 and nearly 63.2 billion cubic metres in 2020, according to the Ministry of Energy. Qatar’s North Field is the centrepiece of this project, with the pipeline carrying up to 30 million cubic metres of natural gas per day from Qatar to the UAE for a period of 25 years.

“In terms of top-line economic performance, Qatar is going to be one of the most strongly performing economies around the world next year,” says Robin Bew, editorial director and chief economist at the Economist Intelligence Unit. “But it’s important to point out that doesn’t mean it has dodged the economic bullet.”

“In terms of revenues coming into the economy, they are going to see a relatively more stable revenue base and that should help them going forward,” says Robert McKinnon, managing director of research at Al Mal Capital. “So they should be able to continue a lot of their infrastructure spend, and in terms of the GCC it would be probably the safest place to invest in the coming year.”

While global oil producers are contemplating ways to prop up crude prices, it would seem that gas producers don’t share the same agenda, for now. Gas and LNG are globally traded on 25-year, long-term take-or-pay contracts driven by a formula, wheras oil is traded on spot contracts. Major gas exporters have met informally for several years at the annual Gas Exporting Countries Forum, a group which includes Russia, Iran, Qatar, Venezuela, Nigeria, Algeria, Egypt, Indonesia and Libya, as reported by Graham Stack in his East of Europe blog.  However Iran is pressing for a formation of an OPEC-like gas cartel to set global prices, whereas Qatar & Russia seem to be more concerned with “reaching strategic understandings” on export volumes, schedules of deliveries, and the construction of new pipelines. They also plan to jointly explore and develop gas fields and coordinate start-ups and production schedules.

Consolidation hits Rainbow Nations telecom sector

800px-flag_of_south_africasvg1Even though merger and acquisitions (M&A) in South Africa were down at least 50% in deal value last year compared with other emerging markets, the telecom sector has seen much activity in the last year, which has also spilled into 2009. A veritable wave of consolidation & a drive towards convergence seems to be the way forward for major players such as Vodacom, Telkom SA & MTN Group.

The largest deal in South Africa was Vodafones (NYSE – VOD) acquisition of a further 15% of Vodacom for R22,5bn ($2.3Bn), bringing control along with atotal holding of 65%, Telkom as part of the deal will divest the remaining 35% to shareholders. Analysts had feared that Vodafone had paid a premium for this stake, however value can be seen in the continued push for consolidation & a genuine effort to move towards converged services. In late December it was announced that the mobile carrier had acquired African network and satellite services firm Gateway Communications for $700 million. The Gateway transaction includes Gateway’s core carrier and business network units, which provide satellite, business and interconnect services to African and multinational companies in 40 countries, but not its broadcasting division.

“As mobile phone penetration levels increase in South Africa, we are actively repositioning Vodacom as a total communications provider with new avenues for growth,” Pieter Uys, Vodacom’s chief executive said in a statement.

Vodacom Group will be listed on the Johannesburg Stock Exchange in 2009, once the Vodafone deal to buy an additional stake is completed. As part of the deal, the Vodacom identity will remain visible on the African continent and it will be the exclusive investment vehicle through which Vodafone will make acquisitions in sub-Saharan Africa, excluding Ghana and Kenya where the group has existing presence via stakes in Ghana Telecom & Safaricom respectively.

Meanwhile, pan-African player MTN Group have not been caught napping, having recently snapped up Verizon’s African businesses, which it is buying to add muscle to its data division. MTN which is Africa’s biggest cell phone operator by subscribers, is buying a 69.38 percent stake in Verizon South Africa, a unit of U.S.-based Verizon Communciations, for an undisclosed amount to help it better compete with rivals such as Dimension Data & Internet Solutions in the corporate communications market.Verizon Business South Africa provides telecommunications to corporate customers in South Africa, Namibia, Botswana, Zambia and Kenya. Also, in response to Vodafone’s move on Vodacom, MTN has bolstered its SA operations by acquiring the remaining 59% of iTalk Cellular that it did not own, iTalk is an MTN exclusive distributor, with over 100 retail outlets across South Africa

“These acquisitions are in line with our strategic vision and will add value to our business,” said MTN SA MD, Tim Lowry. “Through these deals we are enhancing our value proposition, building capacity and broadening our reach to enhance our product and service offerings to customers and clients. The i-Talk Cellular acquisition will strengthen our distribution across South Africa,” Lowry said.

In a counterpose, fixed line operator Telkom (NYSE – TKG) has begun the roll out of a national  3G W-CDMA network. Telkom will initially focus on providing fixed voice and fixed-mobile data and, in the near future, nomadic voice services. This is in part a play to enter into competition with the two mobile players, but also is a side effect of the disastrous state of SA’s copper based telecoms infrastructure. Telkom has also swung into action by spending $63m to acquire MWeb Africa and 75% of MWeb Namibia to help it become a pan-African voice and data supplier.

 

“Our revenues have been under significant pressure from declining voice services due to competition and further impacted by the effects of copper cable theft. Three years ago, we announced we are investing in next generation network (NGN) based technologies to provide new generation customer services and products. It isn’t about a single network but using various NGN technologies, such as W-CDMA, to provide customer-focused services”, explains September.

Network upstart NeoTel has been making decisive inroads into Telkom’s fixed line business since its launch in 2006, Tata Communications backed NeoTel provides converged services in the fields of basic voice and data services, high-speed internet (as well as true broadband access), virtual private networks, network management and hosting services for both corporate & retail customers. One area where it has been very succesful is in providing alternative backbone services to Telkom via its wholly owned transit network. Recently it has announced an agreement with MTN to co-build a national fiber optic network, which will break the stranglehold that Telkom has had on the sector.

Last but not least, Kuwaiti based Zain (formerly MTC) is promising major pan-African expansion with a short-term goal of launching in at least three more countries this year. Since few countries are issuing fresh licences, that will mostly come by acquiring smaller players. Zain Africa’s CEO, Chris Gabriel, predicts that consolidation among Africa’s 100-plus cellular networks will be so intense that only three to five will survive. Smaller players will come under pressure to be absorbed by those behemoths if they offer telecoms or technology-related services.

With all this activity, the South African telco sector is contracting with regards to opportunity & growth, which will, in my opinion spur Vodaone/Vodacom, MTN, Telkom & Zain along with France Telecom/Orange, Orascom & Oger into a set piece which is remiscent of Thomas Pakenhams excellent book Scramble for Africa. Interesting times indeed.



Ups & downs in Vietnam

images155628_2nam2009 can be considered as a  special year for Vietnam & it’s economy as the country has now belonged to the World Trade Organisation (WTO) for two years, facing both opportunities for growth along with internal challenges & heralding a sea change as Vietnams markets are now open to foreign companies as never before. Foreign investors now have the opportunity to enter into Vietnam’s domestic markets & enjoy fairer treatment under law, service sectors such as banking & consumer retail are prime targets for 2009.

Vietnam attracted 1,171 new foreign direct investment (FDI) projects with a total registered capital of more than $60.2 Bn in 2008, tripling last year’s figure, according to the Foreign Investment Agency under the Ministry of Planning and Investment. Demonstrating that Vietnam remains attractive destination for foreign investors, Taiwan being the leader, with an estimated $19.6 Bn flowing into the fledgling tiger last year alone. Malayias & Korea both recently made hefty investments in gaining operational licences for retail operations in Shinhan Vietnam Bank & Hong Leong Vietnam Bank respectively. The SE Asian nation has one of the regions largest domestic market potentials, currently Vietnam is the worlds 13th most populous country, with a population of 82.6M, making it an attractive prospect for both domestic & foreign firms as the population achieves  financial liquidity.

India’s Tata Steel is committed to investing $5Bn in a new steel production plant having entered into a joint venture with Vietnam Steel Corporation and Vietnam Cement Industries for building the integrated steel mill in the Ha Tinh province. For the plant, the company requires 1,300 hectares of land. However bureaucratic holdups & intense competition for land rights have seen the projects first phase being pushed back to 2011. The Indian steel giant, through its wholly-owned subsidiary in Singapore, Tata Steel Global Holding Pte Ltd, will hold a 65 % stake in the joint venture, whilst also extending an equity holding of 30 per cent in Thach Khe Iron Ore mining project in Vietnam, allowing it to become the countrys first integrated steel maker. Korean competitor POSCO already has made investments of $1.2Bn project for building two rolling mills in the Phu My Industrial Park in Ba Ria-Vung Tau province near Ho Chi Minh City. The company is also building a private harbor on the site  to support the two plants and is carrying out feasibility studies for a stainless steel plant and an integrated steel mill in Vietnam.

Meanwhile, domestic steel firms are also booming, helped by a recent tarriff increase on imported steel billet and steel ingot, which was introduced in early December 2008.  According to the Vietnamese Ministry of Finance, “the adjustment of steel import tariffs is necessary to boost the domestic steel consumption and to ensure the stability of the country’s steel market as the current stockpiled steel in companies and manufacturers nationwide has reached  around 3 million tons.”

Thep Viet Steel Corp recently revealed plans to invest in Cambodia, it currently exports 5,000 tonnes of steel per month to Cambodia, which is reported to have large iron deposits, and Vietnamese companies have been granted concessions to explore for the mineral – a major feedstock for steel production. “Iron ore will be a big source of income if the country is able to utilise this natural resource,” CEO Tann Kin Vin said. Prime Minister Hun Sen last year called on foreign investment to take advantage of Cambodia’s iron resources.

In a similar story to Indonesia, Vietnam, which is the regions third largest oil producer,  enjoyed a boom year in 2008, mainly due to the large increases in commodity & oil prices, which saw The Vietnam National Oil and Gas Group, PetroVietnam (PVN), earn  total revenue of about $16.5 Bn in 2008. An increase of 31% over 2007. PVN contributed about $7.1Bn  to the state,  accounting for over 30% of the total state budget revenue.  However, due to lack of refining capacity, Vietnam imports most of its refined oil products. The company is seeking to gain supplies of up to 26.5 million tons of crude per annum in order to supply three proposed refineries in an effort to satisfy domestic demand.

“The company is willing to offer stakes in the refineries in exchange for long term crude contracts”, Tran Ngoc Canh, CEOP of PVN told reporters at the Gasex conference last year, “PVN could offer as much as 30% in each refinery under Vietnam law & more in special cases.” 

Late December, it appears that a “special case” has come to fruition, when PVN announced that it would give up to 49% equity in the Dung Quat oil refinery in exchange for prefernetial crude contracts. The $2.5-billion refinery, located in central Vietnam, has a designed capacity to process 130,000 barrels of crude oil a day and will be able to meet 30% of the country’s demand for petroleum products.In a seperate announcement PVN confirmed that BP will be signing a supply contract to provide up to 50% of the refinery requirements for the plant this week.

PetroVietnam is counting on new exploration projects to boost crude production as the ageing Bach Ho field has shown declining output for the last four years. Projects are currently underway on blocks such as Ca Ngu Vang, Phuong Dong & Si Va Tang alomg with further efforts in the South China Sea around the Spratly Islands. The Spratly project involves an international tangle, as both neighbours China & Malaysia claim sovereign rights in the area. Last year, China forced Exxon Mobil to cease exploration in the area, whilst BP pulled out of a JV with PVN in 2007, citing regional instability.

Meanwhile, PVN is eyeing overseas opportunities for investment & development, the country has interests in 16 foreign oil & gas projects, with 6 in Asia, 4 in Africa & the rest in America. In a joint venture with the Venezuelan Petroleum Corporation (CVP), Vietnam will look to invest $11.4Bn in a project to exploit and refine heavy oil in the Orinoco heavy oil belt in Venezuela. Once operational, the project will turn out up to 200,000 barrels a day, equivalent to 10 million tonnes of oil per year, oil pumped up by the JV will be refined on site into light oil by its own refining plant.

Also, following China National Patroleum Company – CNPC’s recent success in signing a reputed $3Bn contract with Iraq on the Ahdab oilfield, Vietnam is holding talks with the Iraqi oil ministry in attempts to revive a contract signed under the leadership of Saddam Hussein. PVN originally signed a deal with Iraq in 2002 to develop the Amra oilfield, with an estimated output of 80,000 barrels per day. The original deal was never implemented due to United Nations sanctions that followed Iraqs 1990 invasion of Kuwait.

According to Jason GW over at Frontier Markets in his recent, Dong losing its Ding , “the government estimates that the economy will grow by as much as 6.5% in 2009. But an IMF report last week forecasted growth of just 5%. Additionally, a report by Vietnam’s Bank for Investment and Development released this week concluded that the country would likely show a trade deficit of about $7 billion next year, which would lead the dong to fall 3.5 to 5% against the dollar.”

This is all very promising, however, from a personal point of view, concerns still remain regards the tangle of bureacracy that may overshadow the new “open” face of Vietnam for foreign companies & investors. Reports in local media complain that continued over investment in State owned enterprises (as much as 50% of the annual budget) stifle entrepeneurial efforts. Small & medium sized companies are still finding it difficult to access long term loans in order to expand inflation, due to government efforts in curbing inflation. So mixed messages in my opinion, but progress is progress, however slow, I can only hope that investments continue to flow in order to help the economy grow & stabilise in the near term. In addition to these shortcomings, there remain some limitations in Vietnam’s economy this year such as corruption, quality control and allocation of human resources. The World Bank’s report on December 10, 2008 stated that Vietnam’s economy will recover in 2009. Without these issues being aggressively tackled, I fear the flow & recovery may dry up.


GSM standard warms up Indian market, as Reliance announces country wide network

INDIA-TELECOM-RELIANCE-AMBANIIndian mobile giant Reliance Communications (RCom) has announced the launch of a nationwide enhanced GSM network that will cover over 1 billion people, the widest one-time launch. Reliance’s new network is expected to be activated within 5 days and offer seamless coverage on major railway routes, national and state highways through dedicated mobile towers, the network is connected to Reliance owned fibre network for unlimited capacity, both in India and internationally via its Reliance Global subsidiary. 

“In 2003, Reliance changed the face of the telecom sector in India”, said Mr. Anil Ambani, Chairman, Reliance Communications. “Through our nationwide GSM launch coupled with Reliance’s continued focus on our No. 1 CDMA network, we will once again endeavor to re-write the rules of the industry by offering our customers an unbeatable proposition across coverage, quality, service breadth, handset range and above all, value”.

It is envisaged that the GSM launch which will supplement RCom’s existing CDMA infrastructure, will not only help in adding additional net revenue subscribers, but also allow the carrier to garner a greater share of valuable GSM roaming revenues, as it battles with Vodafone Essar & Bharti Airtel alongside state controlled MTNL for market share in the burgeoning sub-continent market. MTNL has already “soft launched” GSM services in early December as previously discussed, Tata Teleservices will also be looking to launch GSM services in partnership with NTT DoCoMo as discussed in DoComo looks to India for growth.

The Department of Telecommunications plans to auction radio bandwidth, or spectrum, for 20 of India’s 22 telecom service areas electronically. A separate auction will be held for selling radio bandwidth for broadband wireless access, or Wi-Max, two days after the 3G spectrum auction. The government has set the starting auction price at $408 million for 3G radio bandwidth across India, with an expected minimum of 5 blocks being bought. 

India, the world’s second-largest mobile-phone services market after China, added more than 10 million subscribers for the third straight month in November and is set to attract more operators as it prepares to auction licenses for starting high- speed wireless services next year.

Telecom Regulatory Authority of India Chairman Nripendra Misra said in October, operators in the U.S., the U.K., France, Italy and Australia may bid for permits to offer the so-called third-generation, or 3G, services, further increasing competition.

RCom, which has a market capitalisation of $9.6 billion, is one of the few major telecom companies in India without a foreign partner. Earlier this year, Reliance & South Africa’s MTN Group failed to reach a deal in tie-up talks aimed at creating a top-10 global telecoms group. As of the end of November 2008, The operator had almost 60 million customers, while Bharti had 83 million and Vodafone’s Indian unit Essar had almost 59 million subscribers.

“We see no reason why we shouldn’t have a 100 million customers,” Ambani said.

Without a principal partner to assist in choosing & delivering GSM Value Added Services (VAS) to run across this new network, I feel that Reliance could well face an uphill struggle. However, in early December, there were rumours reported that up to 26% of the operator may become available as secondary shares. A potential suitor could be France Telecom who failed in a bid to acquire the Nordics Telia-Sonera last summer, they have a fair war chest available to them & I could see the Orange brand making an appearance on the sub-continent. Like the 3G situation in China, this will run & we will be sure to come back & look again as the story unfolds.

Gazprom turns off taps on Ukraine’s gas supply (again)

gazpromjsc-header1In what is becoming an all too familiar show of “transparent” hubris, Russian gas giant Gazprom (one of MSV’s favourite corporate bullies) has once again wished Ukraine a Happy New Year by turning off gas supplies to the former Russian sattelite, as reported this morning by BBC News, prompting fears that European supplies will also be affected.

Gazprom had reduced natural gas deliveries to Ukraine by 25%Monday, saying the country has failed to pay $600 million in gas bills for the year. Gazprom also said that Ukraine’s state energy company, Naftogaz Ukrainy, failed to sign contracts for the supply of gas this year. Gazprom has refuted accusations from Naftogaz that the reduction of natural gas supply from Russia was closer to 35%.

“Due to the lack of progress in negotiations and Naftogaz’s failure to sign gas supply contracts – including for January and February – gas supplies to Ukraine will be reduced by an additional 25% at 1700 GMT [12 p.m. EST],” Gazprom spokesman Sergei Kuprianov said in a statement.

About 80% of Russian gas supplies to Europe pass through the Ukraine, which puts Naftogaz in a position to siphon off supplies intended for other customers throughout Europe. In January 2006, Russia cut supplies to Ukraine completely for a period of three days causing gas volumes across Europe to fall, as Ukraine scrambled to satisfy its demand.

In early December 2008, both parties had agreed Ukraine would pay $1.5 billion in debt accrued this year and last. They also agreed that two controversial middlemen – Swiss based RosUkerEnergo and UkGazEnergo – would be replaced by a 50-50 joint venture between Gazprom and Naftogaz. However, Gazprom insists Ukraine owes another $600 million for 19 billion cubic meters of Russian gas it received without a contract. The oil giant also wants Ukraine to approve the creation of the two new companies set to replace RosUkerEnergo. Yulia Tymoshenko, the Ukrainian prime minister, says the Ukraine has fulfilled its obligations and accused RosUkerEnergo of running up debts for $4 billion cubic meters of gas.

Gazprom chief Alexey Miller in an effort to allay Western fears stated that Gazprom would continue full shipments to the European Union,  through pipelines that cross Ukraine. The Ukrainian president’s energy adviser, Bohdan Sokolovsky, also said Ukraine would guarantee the delivery of gas to Europe.

“Whatever Russia ships we will deliver,” he said. “This is what we have committed to.”

For those readers fresh to the scene, there is a considerable political slant to this measure; relations between Russia and the former Soviet republic have steadily disintegrated since 2005 when Viktor Yushchenko took office following the Orange Revolution. Since then, Yushchenko has angered Moscow by seeking to align Ukraine with the West away from the Kremlin’s influence. Particular bugbears have been Ukraine lobbying to join NATO & also their vocal support for Georgia in the recent “civil unrest” in the Caucasus.

Meanwhile, Russia has more than tripled the price it charges Ukraine for gas. Gazprom had offered a contract with gas set at $250 per 1,000 cubic meters for 2009, which Ukrainian officials said was still too high. As a benchmark, faithful Russian ally Belarus is paying $128 per tcm, whilst European customers are being charged an average $418 per tcm, a hefty premium that Gazprom originally tried to impose on Ukraine late last year.

As previously  reported on MSV in Serbian Standoff, Gazprom is looking at a number of intiatives to pump gas to the West without transitting Ukraine, the primary project being the South Stream Pipeline, which will bypass Ukraine via the Black Sea & land in Bulgaria, transitting Greece & Serbia before going offshore again somewhere on the Adriatic to reach European customers.

UPDATE 1 (04/01/09) from Bloomberg :

Gazprom increased natural-gas supplies to Europe via three routes as Russia and Ukraine courted international support amid a deepening price dispute. Russia’s state-owned gas exporter boosted shipments along two routes through Belarus and one to Turkey, Boris Posyagin, head of Gazprom’s dispatch department, said yesterday in comments broadcast on state television

UPDATE 2 (05/01/09) from Reuters

Croatia, which imports 40 percent of its annual gas needs, most of it from Russia, followed the Czech Republic, Turkey, Poland, Hungary, Romania and Bulgaria in saying deliveries had been affected by the row.

“Imports of Russian gas have been reduced by 7 percent. However, it does not affect supply to consumers as the situation in the system is stable,” Ivana Markovic, a senior official with Croatian pipeline firm Plinacro, told state television.

UPDATE 3 (12.01.09) from BBC News

A statement from the Russian energy giant said Ukraine had signed a deal on the transit of Russian gas to the EU “without any conditions whatsoever”Experts say it will take up to three days for Russian gas to reach some parts of Europe even if Russia agrees in the next few hours to turn the taps back on.

 

Russia had said it could not implement an agreement with Ukraine to resume gas flows to Europe, accusing Ukraine of adding “unacceptable” conditions.

Moscow alleged that Ukraine had added a clause denying it owed Russia for past supplies of gas

UPDATE 4 : (20/01/09) from Bloomberg

Russia’s rouble and the Ukrainian hryvnia strengthened as OAO Gazprom resumed shipments of natural gas to Europe after a two-week shutdown.The ruble snapped a four-day decline against the euro and the hryvnia appreciated to its highest level versus the dollar in six days after Russia’s gas exporter said it will ship about 430 billion cubic meters of gas today. Currencies in eastern Europe pared declines.

“The lack of gas was creating a negative dimension for industry,” said Roderick Ngotho, an emerging markets currency strategist in London at UBS AG. “The resumption of gas means industry can do the best it can given the current downturn in external demand without the added negative of disruptions to energy flow.”