Tuesday, November 30, 2004
Virgin India
I dont know if anyone has been following Richard Branson's forays into India. Right now, it seems like a two-prong sector strategy Branson is following -- entry into the telecoms and the aviation sector. Entry into the telecom sector is pretty easy, given that the FDI limit is capped at 74%. In anycase, Virgin has no plans of building its own network but plans on becoming an MVNO (Mobile Virtual Network Operator) like it does in the United States where Virgin Mobile merely buys minutes in bulk from the Sprint network. So, effectively Virgin would buy minutes in bulk from Airtel (just a hunch given the 1800 band) and launch Virgin Mobile India.
Aviation, on the other hand, is tricky. Though the government has raised the FDI cap to 49%, the caveat is that foreign airlines cannot part-own a domestic airline. So, Branson's strategy would obviously be to invest in one of the Indian airlines -- he's been in talks with Deccan Air and Kingfisher Air -- in a personal capacity. Richard Branson, the investor rather than Virgin Air, ie. Of course, once the Indian government liberalizes its aviation policies (as it surely will), Branson can sell his stake back to Virgin Air. Either way, he needs a footprint in the Indian and Chinese aviation sectors and he's doing his best to find a way in.
Telecoms doesnt really need Branson, though additional competition cannot hurt. The telecom rates in India are already the lowest in the world. The aviation sector though is a different matter. The costs of flying in India are absurdly high thanks to all kinds of bizarre policies in place. In effect, a Cochin-Delhi round ticket is more expensive than a Bombay-London round ticket. The absurdity never ceases to amaze me. Branson has in the past commented on this and has talked about the possibility of doing a Delhi-Bangalore flight for about Rs. 2000.
Yes, I really do think the aviation sector could use a Branson makeover or a shake up, both domestically and internationally. Flights to India are expensive because landing rights are so hard to obtain. To that extent, I hope the new bilateral treaty between the UK and India, which will allow more Virgin flights to India and let Jet and Sahar fly to destinations in the UK has the desired effect of reducing prices on the US-India sector too as more people fly via London.
Aviation, on the other hand, is tricky. Though the government has raised the FDI cap to 49%, the caveat is that foreign airlines cannot part-own a domestic airline. So, Branson's strategy would obviously be to invest in one of the Indian airlines -- he's been in talks with Deccan Air and Kingfisher Air -- in a personal capacity. Richard Branson, the investor rather than Virgin Air, ie. Of course, once the Indian government liberalizes its aviation policies (as it surely will), Branson can sell his stake back to Virgin Air. Either way, he needs a footprint in the Indian and Chinese aviation sectors and he's doing his best to find a way in.
Telecoms doesnt really need Branson, though additional competition cannot hurt. The telecom rates in India are already the lowest in the world. The aviation sector though is a different matter. The costs of flying in India are absurdly high thanks to all kinds of bizarre policies in place. In effect, a Cochin-Delhi round ticket is more expensive than a Bombay-London round ticket. The absurdity never ceases to amaze me. Branson has in the past commented on this and has talked about the possibility of doing a Delhi-Bangalore flight for about Rs. 2000.
Yes, I really do think the aviation sector could use a Branson makeover or a shake up, both domestically and internationally. Flights to India are expensive because landing rights are so hard to obtain. To that extent, I hope the new bilateral treaty between the UK and India, which will allow more Virgin flights to India and let Jet and Sahar fly to destinations in the UK has the desired effect of reducing prices on the US-India sector too as more people fly via London.
