India’S telecom indu­stry is waiting with bat­ed breath for consolidation, exit or fresh investments depending on the policy direction giv­en by the new telecom policy in Octo­ber 2011. Sunil Kanor­ia, co-foun­der and vice-chairman at Srei Infrastructure Finance and director at Viom Netw­orks, tells Vikas Srivastav, that al­though the fundame­n­tals of telec­om firms are strong, the challeng­es are too ma­ny and wi­ll take a while be­fore the sector gets a reprie­ve. Excerpts:

What is the current status of the infrastructure sector and what is your outlook?

The momentum of the old projects is still there and execution of these projects al­one is going to take time for majority of the developers. Besides not many new projects are coming up. There is a concern as to how mu­ch time the new projects are going to take. There is no question that these projects will happen and the issues will be sorted out, but no one can tell how much time it will take.

Why are major projects in civil construction and power held up, especially when the government has planned some $1 trillion worth of investments in the 12th Five Year Plan?

The problem stems from la­ck of decision-making. Th­ere is no action at the Centre and the reform process is very slow. Though there are issues of inflation and fiscal deficit, they need to be cleaned up otherwise th­ey will continue to impact the bottom line and put pr­essure on margins of the infrastructure companies.

Amidst the issues of 2G and 3G scams how is the telecom sector positioned?

The telecom sector is showing signs of improvement as revenues have improved. But there are challenges due to lack of clarity on the new telecom policy. When that happens there will be lot of clarity on the exact strategy by operators. Since too many of them will not exist together, there will be consolidation and exits. Not many people are investing at the moment either as they would like to participate in the consolidation exercise. In next 6-9 months there will be a lot more clarity.

What are the major iss­ues that would be sorted out through the telecom policy?

All the issues related to co­nsolidation, mergers and spectrums. At least the sector should get some clarity on where it is destined to go.

There is talk of Viom Ne­tworks merging with GTL Infrastructure. What is the current status and how is the deal positioned now?

We are interested in the company, and as with any offer, there are too many issues that need to be sorted. It is not just a question of valuation but also other due diligences on overlaps of tower that we need to see. All I can say is that we are open to any opportunity as and when they come and add value to our existing business.

There are also some vendor payment issues related to some 1,200 towers erec­ted in the Mumbai region? There were complaints th­at they were not paid and hence some towers have been switched off. Your comments.

I am not aware of any such instance and it has been a while since we made any fr­e­sh expansion in the Mumbai region. Expansions are not happening across the companies in the tower bu­siness. Whatever little expansion is happening is in the rural areas.

Another challenge that the telecom companies are facing is employee retention. Employees are complaining that there have not been any hikes for the last two years? What are you doing to retain your employees?

We always reward good people and there have been no issues with retention of go­od and hard working peop­le. People had taken very high salaries when they en­tered and one year of toug­hness has forced them to crib. Where will they go th­ey have no other options? There is no short cut and we always value performers.