Liberty group wants to walk into telecom business

NEW DELHI, INDIA: Liberty Group, a leading Indian footwear company, is exploring entry into the thriving telecom business in the country. As per an official in the Department of Telecom (DoT), Liberty is the only company that has expressed interest to set up a joint venture with ITI Limited.

“Liberty has shown interest in forming JV with ITI but it has asked one month’s time before making the final decision,” said the official, who did not want to be named.

The last date for submitting of bids for forming the JV with ITI was July 15, which has now been extended up to August 23, 2010 as no company had come forward to bid for this joint venture.

There are a number of concerns that the companies have expressed in forming a JV with ITI, which include the location of the ITI plant, reservation quota, tax benefit among others.

ITI Limited, a government enterprise, is running in loss from quite sometime and is a concern for the government. It has three manufacturing plants located in Raebareli and Naini in Uttar Pradesh, while the third plant is in Bangalore.

The queries from prospective bidders with regard to RFP for JV shows that the bidders want to avoid manufacturing in ITI plants located in Uttar Pradesh. Unlike the case of special economic zones (SEZs), the government is not providing any tax holidays for manufacturing telecom equipment in these plants.

The government has provided offset clause of 30 per cent for ITI products under procurement rules of public telecom companies, MTNL and BSNL but this reservation will not be applicable for the new joint venture company.

There is vanilla offering being offered for bidders from the government which includes land and building, which are readily available to the joint venture reducing the gestation period, availability of trained manpower, availability of infrastructure like housing and sharing of existing manufacturing facility on commercial terms etc.

The recent change in UAS license condition may push some companies to form this JV. Apart from this, there are little chances that a company will risk its investment in forming JV with ITI in absence of incentives.

CIOL contacted Liberty office in Gurgaon but could not reach the company’s spokesperson for comment on this subject.