Air Sahara to reincarnate as JetLite

To Offer Cheaper Fares, New Network Being Planned, Aircraft Leases To Be Renegotiated To Cut Costs

JET Airways will operate Air Sahara as a separate airline under a new brand, Jet Lite. The airline will be positioned as a value carrier, which is ``not fully low-cost but positioning fares lower than full service airlines’’, Jet Airways chairman Naresh Goyal said. In his first major media interaction in over a year, Mr Goyal and his A team, chalked out the broad contours of the way forward for the two airlines, after the longdrawn acquisition of Air Sahara. Jet Lite, will be a 100% subsidiary of Jet Airways though the operations of the two companies will be completely separate. Unlike other classical low-cost airlines operating in India, Jet Lite will have basic food and beverage service onboard. It is still not clear how the Jet will balance the network of the two airlines to ensure that its existing network is not cannibalised by the new airline. Mr Goyal said the new network was being worked out by route planners and that the two carriers will fly to common destinations. Despite preparing to launch a ``less than full service’’ carrier, Mr Goyal emphasised that he did not think there is such a thing as a low-cost airline in India. They are actually low-fare, he said. Unlike airlines like Ryanair and EasyJet or Southwest, the Indian LCCs do not have the advantage of cheaper secondary airports. To cut costs on Jet Lite, the airline will now review all the aircraft leases signed by Sahara and will try to renegotiate some of them. Expensive leases like those of the CRJ jets may be terminated, even if there are penalty clauses Mr Goyal said. Other synergies are expected from cutting engineering costs and increasing productivity because of the larger and more efficient Jet Airways operations, he said. The Jet Lite fleet will ultimately be a combination of owned and leased aircraft. Commenting on Jet Airways’ own expansion plans, director on the Jet board Vic Dungca said the airline will induct 20 long-haul aircraft, a mix of Boeing 777s and Airbus A330s in the next 18 months. The airline has planned to open a second hub in Brussels for its US flights and will also launch operations to China and the middle east. These flights will however, take a few years to turn profitable and analysts say the Jet management will have to be ready for a huge cash burn in the interim. On the domestic front, the airline plans to add capacity at the rate of about 15% per annum, even though the market is growing much faster at roughly 40%, Mr Goyal said. Jet plans to raise about $400m by diluting equity later this year. The airline will also gradually upgrade its domestic product with new seating and inflight entertainment over the next three years. Mr Goyal said he did not believe that marketshare was an efficient barometer to measure the health of an airline. Jet Airways has 20 to 30% higher yields than rival airlines, he said.

Courtesy: EconomicTimes

Ericsson, Nokia set to clinch $5-b deal

Motorola Withdraws Petition; Decks Cleared For BSNL’s GSM Plan

US-BASED telecom major Motorola has withdrawn a petition challenging its disqualification in the 45.5 million lines GSM tender issued by stateowned Bharat Sanchar Nigam (BSNL), thus paving the way for implementation of one of world’s largest telecom equipment contract. Ericsson and Nokia, which had emerged as the lowest bidders, are now set to clinch the $5 billion contract from BSNL. The Delhi High Court on Monday dismissed Motorola’s application as withdrawn. “In view of the tremendous growth taking place in the telecom sector in the country and BSNL’s petition of capacity constraints to have its share in this expansion, Motorola has decided to withdraw the case filed in the Delhi High Court,” Motorola said in a statement. It may be recalled that Motorola had filed a petition in Delhi High Court on October 9, 2006, challenging its disqualification in the 45.5 million lines tender. Following this, BSNL was unable to place any order during the pendency of the petition. The award, which had gone to Ericsson and Nokia would now be implemented with the withdrawal of this petition. Ericsson, which was the lowest bidder, would get 60% of the 45.5 million lines while the second lowest bidder — Nokia— would get the remaining share of the northeast and west zone. Motorola had earlier challenged the award of the contract to Ericsson saying it was the lowest bidder and BSNL had wrongfully disqualified it on the technical evaluation ground. When contacted, BSNL director (finance) SD Saxena said that the order would be placed in the next 15-20 days. “We will try to make up for the lost time by giving more connectivity as soon as possible,” Mr Saxena said. Ericsson India V-P (marketing & strategy) P Balaji told ET, “This is good for BSNL’s growth and India’s telecom sector. We cherish our association with BSNL since the launch of their GSM services and look forward to further strengthening our relationship.” BSNL’s subscriber addition had taken a hit, as the operator had exhausted its capacity in certain circles. Considering that it takes around three months for the first batch of equipment to arrive after an order is placed, BSNL’s plans should be back on track in the next 3-4 months. In its statement issued on Monday, Motorola, however, pointed out that the withdrawal did not reflect any change from its original stand on the tender award. “Withdrawal of case by Motorola in no way reflects any change in the company’s original position that its bid was in compliance with the tender condition,” it said. “BSNL is a valued customer and the company looks forward to its continued partnership with BSNL and other customers to connect the unconnected,” Motorola said. Motorola was disqualified on technical grounds on October 7, just two days before the opening of financial bids. The equipment supplier later challenged the decision in the Delhi High Court.

INDIA TALKY

BSNL, formed in October, 2000, is world's seventh largest telecommunications company Services provided by it include wireline, CDMA mobile, GSM mobile, Internet, broadband, carrier service, MPLS-VPN, VSAT, VoIP services, IN services It connects 602 districts, 7,330 cities/towns and 5.5 lakh villages BSNL cellular service, CellOne, has more than 17.8 million customers, ie 24% of all mobile users. It has 35.1 million basic phone subscribers ie 85% share of the subscriber base and 92% share in revenue terms Its infrastructure asset on telephone alone is worth about Rs 63,000 crore ($14.37 billion). BSNL plans to expand its customer base from present 47 million lines to 125 million lines by December 2007 and infrastructure investment plan to Rs 733 crore ($16.67 million) in the next three years.

Courtesy: EconomicTimes

Gold sales shine on rising rupee

While Gold Rose Globally By $5 Over Weekend, In India Parity Price Fell By Rs 100

THE appreciation of the rupee has stemmed the gold price rise for domestic buyers. As the rupee steadily moved up against the dollar, from Rs 44 to Rs 42 in the last month, the gain in the net rupee value of gold has been buffered to an extent. "Gold price has steadily been climbing in the international market, but with the rupee rising against the dollar by over Rs 2 in the last month, the net gain in gold price is about 2% against what would have been 7-10%," said Mehul Choksi, chairman, Gitanjali Group. As a result, the demand for gold is slowly picking up, although it is much lower compared to the same period last year. With the wedding season on, and Akshaya Tritiya, considered an auspicious day to purchase gold approaching, the rupee appreciation is seen as a saving grace. Offtake of wholesale gold has been much lower this year, at about 400-500 kg per day in the Mumbai market, almost half of the previous year's business due to the high gold price. "If gold falls in the international market, then the demand would definitely pick up. A good price would be between Rs 9,100- Rs 9,200 per 10 gm," said Suresh Hundia of Bombay Bullion Association. On Monday, rupee closed at 41.85 to a dollar, the highest in nine years. Even as gold appreciated internationally by more than $5 over the weekend, from $684 per ounce on Friday to $689 levels on Monday, in India parity price fell to Rs 9,424 per 10 gm from Rs 9,502. The rupee gained by over 60 paise from Friday. International gold touched nine-week highs on Monday, on the back of a weak dollar and anticipation of demand for the metal as a hedge against inflation.

Courtesy: EconomicTimes

NIIT scouting for overseas buys in retail & fin services

LESS than a year after it acquired UK-based insurance solutions company Room Solutions, software services exporter NIIT Technologies on Monday said it is scouting for overseas buys in domains including retail and financial services. “We would like to do an acquisition in FY08. We are looking at companies both in the US and Europe,” said NIIT Technologies CEO Arvind Thakur, adding that the acquisition could range anywhere between $5 million to $80 million. Mr Thakur said the company was also looking at acquisition opportunities in its existing verticals of travel and transportation, besides retail and financial services. “The acquisitions will be focused on closing gaps in the front-end. The acquisition strategy is being driven by domain knowledge, in certain cases country-specific domain expertise within a specified vertical,” he said. For instance, within the retail vertical, NIIT could look at companies specialising on specific solutions in merchandising, warehousing and logistics while and in case of airline (transportation) it may be loyalty solutions, cargo solutions, amongst others. The company would fund its future acquisitions through a mix of debt and internal accruals, he pointed out. NIIT Technologies — which was hived-off from NIIT in 2004 — has four acquisitions tucked in its belt, including a German IT company AD Solutions and US-based Data Executives International. In May 2006, NIIT Technologies acquired a controlling interest in $25-million Room Solutions, in an attempt to strengthen its presence in insurance segment. Room Solutions is focused on the commercial insurance market including IT solutions to the customers of Lloyd’s, the largest reinsurance market in the UK.

Courtesy: EconomicTimes

Isuzu, Munjals talk 4-wheeler foray

JAPANESE truck and sports utility vehicle-maker Isuzu is understood to be talking to the Munjal family of Hero group for a possible foray in the Indian market. The company — which currently supplies engines to several Indian players and Tavera kits to General Motors India — has a technical tie up with Sumitomo in commercial vehicle company Swaraj Mazda. According to sources in the auto industry, although the talks are on, it’s still not clear whether the Hero four-wheeler venture will focus on SUVs and cars or commercial vehicles. When contacted by ET, Isuzu ASEAN operations group leader Kenji Matsuoka said: “I cannot disclose anything on this subject. I don’t say yes and I don’t say no.” For his part, Hero Corporate Services chairman Sunil Kant Munjal said: “We look at several new businesses from time to time. At any given time there are 10-15 opportunities that we are looking at. So we can neither confirm nor renounce this issue. All we can say is that on the four-wheeler project we are nowhere near taking a decision.” The $3-billion Hero group recently announced its intention to get into the four-wheeler business. It’s current partnership with Japanese major Honda is restricted to two and three-wheelers only. Auto industry sources say if the talks to Isuzu take off, it would put an interesting spin to the Hero group’s relationship with long-time partner Honda. Indeed, Honda’s comfort level with Hero’s four-wheeler partner could also determine the Munjal family’s final choice. Isuzu has been sniffing around for opportunities in India, say sources. One of the rumours doing the rounds is that it may also take some stake in Sumitomo-controlled Swaraj Mazda where it currently just has a technical collaboration. However, there has been no confirmation of this news so far. Isuzu already has a brand presence in the country thanks to its engines gracing products like the M&M Invader, the HM Ambassador and more recently the Rhino SUV from Sonalika. The Hero group isn’t the only two-wheeler major to be talking four-wheelers. Already arch rival Bajaj Auto has announced it will crank out a range of ‘lite’ goods carriers and will showcase a lite concept car at the Auto Expo next year. With the competition in the motorcycle market getting cut throat and the rate of growth slowing down, players are looking at expanding their product portfolio. That’s where the interest in four-wheelers comes in.

Courtesy: EconomicTimes

Bajaj will not get off 100cc

MONTHS after Bajaj Auto shocked the industry with news that it was exiting the 100cc segment, the company does not seem to be in any hurry to let go of the big volume segment. According to Bajaj Auto GM marketing Amit Nandi: “We are not getting out of the 100cc segment. Rajiv Bajaj’s statement has been misinterpreted. We will continue to sell 100cc bikes till there is demand.” Late last year, the junior Bajaj announced that the company would move out of the bread and butter 100cc four-stroke bike segment and upgrade customer to something more contemporary. “What Rajiv meant was in the long-term we will upgrade customers to something better than what is currently being offered in the 100cc segment. It will be a better offering possibly with a more powerful engine,” explained Nandi. Sources in the know say Bajaj might take up to three years to exit the segment which constitutes nearly 65% of the Indian motorcycle market. Bajaj kickstarted production in its Pantnagar facility with its 100cc Platina, also lowered the price of the bike by Rs 3,000 to pass on the tax-benefit accrued in Uttranchal. The move is expected to hit arch rival Hero Honda where it hurts, since its mainstay the 100cc market is likely to be impacted by Paltina’s lowered prices. According to industry insiders, Bajaj Auto seems prepared to take the price game further, “ Since Bajaj has decided that these products (CT 100 & Platina) do not determine the future of the company in the entry segment, they will squeeze them for all they’ve got. It may not come as a big surprise if Bajaj Auto decides to take a hit in its margin on the 100cc bikes to keep competition in the segment going,” said an analyst with a Mumbai-based brokerage. Bajaj is looking at launching a new motorcycle platform later this year targeted at the entry segment of the market, but this launch is unlikely to spell the end for Bajaj Auto 100cc portfolio in the short term. Bajaj Auto expects demand in the motorcycle market to snap out of its sluggish mode in the first quarter of FY 07. The marriage season that traditionally begins in April often brings with it high sales for automakers, but with interest rates on a climb prospective customers seem to be stalling purchase decisions. Two-wheeler makers have been coping with high stock piles at the dealer end and high delinquency amongst loan takers for the past few months. Motorcycle sales grew around 13% last year ending the year with a whimper as sales volumes in March failed to impress.

Courtesy: EconomicTimes

Cos bullish on ACs & fridges, TV sales may stay sluggish

WITH consumer durables production growth rate plummeting to a meager 1.6% during February 2007, an ominous sign of an impending slowdown, one would expect marketers to be a worried lot, right? Not really, for the tone and tenor of leading marketers in the Rs 25,000-crore industry does not betray any nervousness on either demand slowdown or major revamping of their summer sales strategies. Holding the price line, despite input costs going up, most big durable makers such as LG, Samsung, Mirc Electronics and Haier expect no major downfall in sales during the next three months. Apart form colour televisions, which are already witnessing growth tardiness for the past month or so, air-conditioners and refrigerators are expected to grow handsomely, 45% and 15% respectively over last year, according to general consensus in the industry. “We are not revising our sales targets despite all the concerns, as no slowdown in terms of sales is expected. The buoyancy in the economy would have had a stronger impact on the sales and growth of the industry had it not been for the pressure of interest costs,” says Samsung India deputy MD Ravinder Zutshi. The Korean chaebol is expecting its ACs and refrigerator range to grow at 50% and 18%, respectively, in 2007 over last year. “If the interest rates are hiked further by consumer finance companies, we would need to subsidise the interest costs to a greater extent so that the consumer does not have to take the full brunt of the hike,” adds Mr Zutshi. With just 15% of all durable purchase financed, there is only a marginal impact on demand due to rising interest rates. LG India too seems bullish about sales in the current quarter (April-June) with expectations of an over 20% growth in ACs and 10-15% growth for refrigerators. “We are not getting back to any (freekind) promotion. Our sales will come in from the pull created by new products along with a robust supply and distribution chain,” says LG India VP, sales & marketing Girish Rao. The company, though is re-launching its exchange programme, LG First — launched with much fanfare around January and discontinued shortly — for the summer months with a renewed tie-up with its dealers. “There has been a slowdown in CTV sales but both ACs and refrigerators are expected to grow. The marriage season in the North will also help push the sales,” says Mirc Electronics VP, marketing & sales Vivek Sharma.

Courtesy: EconomicTimes

Production growth dips for durables

HIGH interest rates coupled with the Free Trade Agreement (FTA) with Thailand have claimed the first casualty. In the first signs of a slowdown, manufacturing growth in the Rs 25,000-crore consumer durables industry dropped radically to 1.6% in February in contrast to over 20% growth last February. Imports of colour television, an important segment of the white goods industry, have gone up from $0.06 million in 2004-05 to $83 million in 2005-06. It is projected to hit $150 million in 2007-08. The Index of Industrial Production with base 1993-94 for the month of February 2007, released by the Central Statistical Organisation of the Ministry of Statistics and Programme Implementation, points to continued loss of growth momentum in consumer durable production. January last, the growth rate was only 6.8% over 15.9% in the year-ago period. December 2006, too, showed a similar slowdown, 3.3% over 12% for December 2005. “The compression of demand could be responsible for the low IIP in the latter months of the fiscal. And this comes from the tight monetary policies of the RBI, which resulted in hikes in interest rates,” says Prime Minister’s Economic Advisory Council member Saumitra Chaudhuri. Among consumer durables, apart from the 0% duty under the FTA with Thailand, a hardening of interest rates, high levies and the rapid march of CPI over the last few months seem to have contributed significantly to the slowdown. “On an average, duties in the durables sector sit at 30%, whereas computers and mobile phones have been given preferential treatment. Moreover, we don’t have any incentive to manufacture in India as the FTA with Thailand allows many durable products, including TVs, at 0% basic custom duty since Sept 2006,” complains CEAMA president Anoop Kumar. Under FTA with Thailand, the basic custom duty on consumer durables stood at 12.5% in September 2004, and came down to 6.25% in September 2005, which was further lowered to 0% in September 2006. That explains why Sony is importing its TVs from Thailand. The cost of capital has not worked for manufacturers who’ve had to stock inventories. “The offtake has slowed down since the CPI has increased over the last few months making durables out of reach of the middle class consumers. Besides, in January and February sales of durables in general take a dip,” says Godrej & Boyce VP, retailing Shyam Motwani. Says Whirlpool of India VPmarketing Shantanu Das Gupta: “We have not yet seen a slowdown (in demand). What is growing on consumer durables market are imports from China,” he points out.

Courtesy: EconomicTimes

In race for eyeballs, marketers losing sight of their consumers

NOW that cricket has caused such anguish among millions of Indian fans, and painful post-mortems are underway regarding the Indian team’s miserable performance, it may be the opportune moment to raise the question: why advertisers behave so un-sportingly. Why must the price they extract for allowing me to indulge in my passion for the game by watching it on TV be so high as to destroy the pleasure of doing so to a substantial extent? I appreciate that the advertisers spend all that money in the hope of selling their brands to me. But why do they think that the best way of doing that is to drive me crazy by playing intrusively, the usually unintelligent and unaesthetic ad over and over again, anything between 20 and 30 times during the course of a single day’s play? What is the assumption they are making about how the human mind works? Who has told them that the more they repeat the message the more likely I am to remember it, like their brand and buy it? Don’t they realise that I am not an inert, passive involuntary receiver of advertising message? That my brain is a clever machine, which shuts off to protect itself from unwanted nagging? That after having processed some message, it pays no further attention to it in subsequent repeated exposures, so that it can keep itself awake and alert only for new stimuli in the environment? That, is its survival mechanism. And not only do the advertisers repeat their message ad nauseam, they do it so rudely and intrusively. Before the action connected with the last ball of an over gets completed, the commentator’s voice is rudely cut off in mid-sentence and the unending sequence of ads intrude. By the time we go back to the game, the first ball of the next over is often bowled, thereby reducing the over to a 4-ball affair for the viewer. We are never allowed to soak in the emotions on the field when a wicket falls, or see “live” the drama connected with the event, because at that very instant we must be rudely interrupted, and instructed, for the millionth time, about the soft drink that will make me a super hero, or the magical car that will go round the world on a drop of petrol or the mobile phone that acts like the pied piper’s flute for all the pretty girls around. I will have to wait for the replay to catch what I missed “live”. Can anything be more irritating than the intrusion of a silly brand slogan in the radio commentary every time a boundary is hit? When I am immersed in the exaltation or frustration of the passage of play of the moment, that is not the time to talk to me about soft drinks or two-wheelers or mobile phones or whatever. Why do they disturb me when I least want them to? Why do they spend all that money to win my friendship and end up, instead, by generating an enormous pool of irritation in me? What lies behind this maddening state of affairs? It is a witches’ brew of greed and myth, each feeding on the other. The greed is that of the media and channel owners. In order to squeeze the last drop of advertising revenue, they exploit the naiveté of the advertising community and perpetuate the myth that the large viewership of cricket matches means a large captive horde of zombielike consumers inertly waiting to be “reached’ and mesmerised into buying a whole range of products and services through the simple technique of repeated advertising “hits”. The media and channel owners tempt the advertisers with estimates of the large number of “eyeballs” staring at the TV screen during a match, and the media buyers in the advertising companies promptly get to work with their new numerology to translate the number of ad repetitions they will buy into the number of advertising punches they will score. TRPs, GRPs and OTSs make up the currency of transaction in this mythological world. Not realising that the ability of these magic-like numbers, to reflect the real effectiveness of advertising expenditure in the real world populated by real people like you and me is no better than that of Monopoly money in reflecting the real wealth of the players, the advertisers fall over themselves to pay substantial sums of real money to the media owners to buy a slice of advertising slots. Now, the channel owners must try to nurture this ideal state of affairs. This they do by creating as much hype about cricket as possible. Exploiting the chronic inferiority complex of Indians and the history of one or two rare successes of its cricket team in the international arena, they burden the game into becoming something more than a mere game, — the nation’s icon of national prestige. The more the hype, the more the jingoism, the more the TRPs, GRPs, OTSs, the more the scramble among advertisers to buy ad time, and less the cricket that viewers get to see. What a virtuous cycle! After the debacle in the Caribbean, everybody is undertaking a reality check about the real skills of the Indian team. I earnestly request the advertising community to do a similar reality check about the real effectiveness of their advertising expenditures linked to cricket. To do that, they need to understand how the human mind works, how we process information. They need to be humble and borrow from the enormous wisdom about this lying within the academia of psychology, cognitive sciences and neurosciences. They will find there nothing that justifies their profligate advertising behaviour. They will realise that those eyeballs they are chasing are blind to their ads. At the very least, they should introspect and examine their own reactions as normal human beings when bombarded with unwanted messages. But reality checks can be dangerous. If the advertisers realise that all the money that they have spent on cricket has mostly flown down the drain, they will stop doing so. At the end of it all, I may not be able to see any cricket on TV, not even the 4-balls-per-over version. Is that a blessing in disguise? Perhaps. (The author runs a marketing strategy consultancy, Market Modellers in Singapore)

Courtesy: EconomicTimes

Timex to open 200 retail stores

Timex Watches on Monday said it plans to increase its share in the domestic market by setting up around 200 retail stores in India in next 30 months, reports PTI from Bangalore. "At the end of this month, we will have at least 45 stores and open four more," Timex GM marketing Vikram Arora said. The company is aiming to set up over 200 retail stores, mainly in metros, by the end of 2009 or in next two-and-a-half years, Arora said. "We will expand pan-India, across all geographies. But largely concentrate on the metros," he said.

Courtesy: EconomicTimes