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Videocon Telecom to get foreign partner later on improved valuations

Telco not in hurry to get investment or technology partner; focus is to enhance valuation now; likely to turn EBITDA positive in first quarter

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Videocon Telecom, which had lost licences in 21 circles after the 2012 Supreme Court ruling, is all set to turn earnings before interest depreciation, tax and amortisation (EBIDTA) positive in the first quarter of the current financial year.

Arvind Bali, CEO and director of Videocon, said the company, which now had licences in the seven circles, was already cash positive in Punjab circle by Rs 100 crore and is likely to become cash positive in Madhya Pradesh (CG) circle by June 2015. The company will breakeven in Gujarat by December this year and in Haryana by March, 2016.

Bali said since his company had only recently rolled out services in the circles of Uttar Pradesh (UP-west), UP (east) and Bihar, which would take 4-5 years to recover investments and become cash positive.

He said the overall business including National Long Distance (NLD), International Long Distance (ILD), wireline and others would generate enough cash by March 2016 to meet the company's operational cost.

"By the end of the current fiscal, we will be meeting our operational cost from internal accruals and will raise funds only for capital expenses," he said.

Bali said the company was not in a hurry to get investment or technology partner as it wanted to enhance its valuation before getting one.

"We are open to getting a foreign investment partner but we are not in a hurry right now. With time, our valuation is improving and it would be better to get a partner at better valuation at a later date," he said.

Current rules allow mergers and acquisitions (M&A) among operators as long as the combined market share of two entities doesn't cross 50%.

The government has yet to come out with clear guidelines on M&A in the telecom sector. As per the existing rule, any company buying out another company had to pay the current market price of the spectrum.

According to the latest Cellular Operators Association of India (COAI) data, Videocon had the lowest market share in February at less than 1%. However, it grew at the fastest pace of 3.35% in the same month.

Bali said the telco's growth was being spurred by data segment, which grew at a whopping 147% for the FY15, albeit on a lower base, contributing over 11.5% of the gross revenue. The company projects it is likely to go up to 15% of the gross revenue in the current fiscal.

As per the numbers put out by Videocon on Wednesday, the company improved its net rate per minute (NRPM) by 28% compared to last fiscal in its GSM business. Videocon's topline in the last financial year grew 53% to Rs 1,974 crore as its subscriber base expanded 38% to around 10 million.

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