CHAIRMAN'S COLUMN

Warren Buffett recently decided to fork out a massive US$ 44 bn to buy the US rail road giant Burlington Northern Santa Fe Corp. He referred to the deal as an all-in wager on economic future of the United States. For a man who wouldn't touch anything that does not have a sustainable competitive advantage, the rail road giant must surely be having plenty going for it.

Interestingly, the Indian government also seems to have of-late taken infrastructure growth, particularly investment in roads, a little more seriously. A leading business daily today reports how as many as 27 road projects worth a sterling Rs 300 bn may start rolling within a fortnight, thanks to lesser red-tapism in the bidding process. The government has finally cut the red tape that kept the roads sector tied down by letting the Ministry of Road Transport and Highways decide on bidding procedures and make changes to bid documents, effectively keeping the Planning Commission out of the entire process. More importantly, the private sector which virtually lost interest in road projects over the last two years after the Plan panel, introduced a string of tricky clauses in the bid documents, may make a comeback.

Although the Ministry of Road Transport has ambitions of building 20 kilometers of roadways a day, so far, the government has only been able to build 6.5 kilometers everyday. The Ministry has therefore taken a rain check and has pushed the target of constructing 7,000 kilometers of road this year by another three months. Nevertheless, once achieved, the prospects of economic benefit from the same to India far outshine that from railroads to the US.

The telecoms sector seems to be occupying the maximum newsprint space these days. The industry which crossed the milestone of 500 m subscribers during the month of September 2009 is on one hand being lauded for the achievement; considering that this figure was the target set for December 2010. However, on the other hand, there seems to be no end to the price wars in the sector. After voice calls, the latest to join the war is text messaging services (SMS).

A leading daily reports that with the cost of sending an SMS being less than a paisa for the telecoms company , at an average of Re 1 per SMS, India's claims of having among the lowest telecoms tariffs in the world go out of the window. Thus, as new entrants flood into the market, SMS tariffs could become the next major frontier of the pricing war now raging in the Indian mobile services industry.

It may be noted that SMS and other value-added services currently form 10% of the Indian telecom industry's annual revenue. With the new entrants seeking immediate regulatory intervention in the pricing of same, one needs to watch out for the fate of ARPUs (average revenue per user) that the industry leaders have enjoyed so far.

AJIT NALINAKSHAN.