IIPM BBA College: February 2013

Friday, February 8, 2013

INTERVIEW : VIVEK COUTO, EXECUTIVE DIRECTOR, MEDIA PARTNER'S ASIA

Vivek Couto, ED, Media Partners Asia talks about the futur drivers & challenges for the DTH sector in India

B&E: With metros almost saturated, do you foresee a static growth as rural penetration of DTH is still slow?
VC: Honestly speaking, as of now, all the DTH players are aggressively targeting the smaller towns and cities. That will continue to be the trend especially in rural areas and smaller towns that have limited or no cable, thereby tapping new audiences for TV. DTH is therefore the primary audience but there will be a greater share in metros in time to come; only it will be incremental as opposed to seismic. Also, analog cable will prove hard to displace in some metros.

B&E: What are the roadblocks that might hinder the growth of DTH segment in India?
VC: The dominance of analog cable is the key issue. The only way is to encourage a multi-room DTH mentality as is prevalent in overseas markets – connect DTH sets across the home, also ramp up pay per view (PPV) services, PVR and others. In India, PPV and PVR are the key current limiters of churn. In certain markets, PPV and VOD substantially limits churn with 50% of subscribers not electing to churn in certain instances because of VOD but it's hard to monetise directly. PVR is easier to monetise and limits churn effectively.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Thursday, February 7, 2013

UK’s General Elections were a forgone conclusion

The results of UK’s General Elections were a forgone conclusion, but this long drawn out impasse might throw some strange bedfellows, reports James Landale from London

Legitimacy Question

So what may David Cameron have in his goody bag to offer the Liberal Democrats? Well, they have some policies that cross over – both parties for example want a so-called pupils’ premium to support educationally deprived children.

But the Tory leader will have to tread carefully over any discussions about proportional representation (PR). Many Tory MPs would strongly oppose any deal that paves the way for PR. One possible option could be the promise of a referendum on PR, with the Tories reserving their right to oppose.

But even that would be step too far for some Tories. One told me, “The party offering PR has just come third in this election. Why should we agree to something the voters have rejected.” Some Tories might, however, tolerate fixed-term parliaments, another long-term aim of the Liberal Democrats. For now, Cameron’s aides are ruling nothing out and promising to be constructive.

If the Liberal Democrats and Tories do secure a deal, Brown would have to resign. He would know that in a few weeks he would not be able to command the confidence of the House of Commons. But if there is no deal, then the Liberal Democrats and Labour would talk.

Any Liberal Democrats-Labour deal would depend entirely on legitimacy. How could they sell a government to voters that would not be seen as a coalition of losers? They would argue that there is a majority opposed to the Tories and that they – as a coalition – have a mandate. But this would be a hard sell. As my taxi driver said this morning, “So the Tories got most votes and most seats. So why haven’t they won?”

The ultimate arithmetic will matter. But then the talks had already begun.

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Wednesday, February 6, 2013

Will the new bankers please stand up?

After many years of waiting, Pranab Mukherjee says RBI will issue licences to new banks. Is the RBI on the same ground as Pranab Mukherjee? Evidently not!

Think of financial ‘inclusion’ in India, and you will invariably discover that financial ‘exclusion’ is far too conspicuous. Digest these for some evidence: out of the 600,000 odd villages in the country, only 5.3% have a commercial bank branch, which translates to one branch catering to 26,000 individuals in rural areas. Even if we take the entire country’s population into consideration, only 40% possess a bank account in India, as compared to 95% in US! The proportion of people possessing any form of life insurance cover is as low as 10%, while those with a non-life insurance is an abysmally low 0.6%. Only 13% Indians possess a debit card, while the credit card cover is as low as 2%. The most recent National Sample Survey Organisation 2008 study reveals that out of the 89.3 million farming households in the country, 51% did not receive credit from either institutional or non-institutional sources of any kind. Even where 33 million ‘no-frills’ bank accounts are claimed to have been opened, 89% of these accounts are dormant today, as per K. C. Chakrabarty, Deputy Governor, RBI.

These statistics are perhaps sufficient to prove the extent of financial exclusion in the country. At the same time, there can be no second thoughts on remedial actions that need to be taken in order to unleash the power of fortune at the bottom of the pyramid. Perhaps, it was an admixture of these very glaring statistics, added to the recommendation of the S.S. Tarapore & Raghuram Rajan committee report that played the motivation pill for the Union Finance Minister Pranab Mukherjee, who promised to take a step towards altering this gloomy state of affairs. In his Union Budget 2010-11 statement, he said, “We need to ensure that the [Indian] banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services.

RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies (NBFCs) could also be considered...” Strong reason to smile for many, but the celebrations are still miles away, thanks to the dictionary which does define a ‘promise’ and a ‘policy’ very differently!

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Tuesday, February 5, 2013

Ben, the concoction’s giving us a hangover!

Having paid a price for their ‘irrational exuberance’, economies in general, and financial institutions in specific are suffering from a hangover of their own mistakes, says B&E’s Gyanendra Kumar Kashyap

Ever since the collapse of the once mighty and iconic Lehman Brothers in September 2008, the Group of 20 largest industrialised economies in the world (G20) have spent more than $2.2 trillion – much of it borrowed – trying to restore growth. To put matters into perspective, US had too come up with a sweeping $787 billion bailout package (better known as Troubled Asset Relief Program, TARP) for the nation’s ailing financial institutions that included $180 billion assistance to the insurance giant AIG, $45 billion to Bank of America (BoA), $50 billion to Citigroup, $25 billion each to JPMorgan Chase & Wells Fargo and $10 billion each to Goldman Sachs & Morgan Stanley.

Considering the fact that the equity prices of global banks fell by 75% (between July 2007 & March 2009), resulting in a loss of market capitalisation of about $5 trillion, the efforts by industrialised economies to restore growth and stem the loss of global wealth, which by then had eroded $25 trillion (almost 45% of global GDP), the Federal Reserve’s move seemed well intended.

Cut to December 2009 – BoA announced a plan to repay the $45 billion in federal funds it received; Wells Fargo too declared repayment of $25 billion of TARP in full while Citigroup is still desperately trying to win permission from the Federal Reserve to repay its remaining debt by selling new stocks. Amidst the growing belief that the risk appetite has returned, the equity markets are improving and capital markets have reopened; nevertheless, policymakers face a unique situation which economists term as ‘debt overhang’ and non–economists prefer calling it ‘debt hangover’.

To get a tongue-tingling taste of what the term ‘debt hangover’ means, here are some earnings figures from the fourth quarter filings of some of the leading financial institutions who had once ‘seemingly’ benefitted from TARP. While BoA reported a loss of $5.2 billion (after a $2.24 billion loss in Q3), Citigroup returned home a negative $7.6 billion! And not surprisingly, both the losses are accounted for by the repayment of a portion of funds they had received as a part of the Fed bailout package (while Citi paid back $20 billion, BoA had to return $45 billion).Debt hangover, we repeat!

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