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The Nutgraf : Amazon is learning

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What a week.

Too many things.

No time for small talk. 

Let’s dive in. 


What Vodafone didn’t do

Maybe you know this story.

In The Hitchhiker’s Guide to the Galaxy, the science fiction book written by the peerless Douglas Adams, a bunch of aliens construct a massive supercomputer to find out the ‘Answer to the Ultimate Question of Life, The Universe, and Everything’. 

After running computations that take it 7.5 million years, the supercomputer finally comes up with an answer—42. 

The aliens are confused. 

“Forty-two!” yelled Loonquawl. “Is that all you’ve got to show for seven and a half million years’ work?”

“I checked it very thoroughly,” said the computer, “and that quite definitely is the answer. I think the problem, to be quite honest with you, is that you’ve never actually known what the question is.”

“But it was the Great Question! The Ultimate Question of Life, the Universe and Everything!” howled Loonquawl.

“Yes,” said Deep Thought with the air of one who suffers fools gladly, “but what actually is it?”

A slow stupefied silence crept over the men as they stared at the computer and then at each other.

“Well, you know, it’s just Everything … Everything …” offered Phouchg weakly.

“Exactly!” said Deep Thought. “So once you do know what the question actually is, you’ll know what the answer means.”

In October last year, the Supreme Court of India delivered a body blow to India’s teetering telecom sector in a verdict where it upheld the Department of Telecommunications’ (DoT) definition of Adjusted Gross Revenue (AGR). 

In its decision, it directed telecom companies to pay long-pending dues totalling to Rs 1,47,000 crore ($22 billion). 

That was the answer.

Last week, everyone tried to figure out what the question was. 

The Question

Let’s take Vodafone Idea.

Fine. It needs to pay AGR.

But how much, exactly?

Nobody can agree on that. Because everyone is trying to figure out… what counts as Adjusted Gross Revenue, and what doesn’t. 

On paper, for Vodafone, this number is somewhere around Rs 53,000 crore i.e, $8 billion.  

However, unsurprisingly, Vodafone Idea has a different interpretation of this amount. Here’s what Vodafone Idea’s counsel, Mukul Rohatgi, told news channel NDTV last week.

“On self-assessment basis, we have found that the dues are ₹7,000 crore on principal and there is penalty and interest and interest on penalty, which will take this up to ₹23,000- ₹25,000 crore,”

That’s half of what the DoT estimates. 

Meanwhile, the DoT thinks that the original amount is actually too small

The Department of Telecom is still working on final adjusted gross revenue dues that service providers have to pay as it has detected variation in accounting practices adopted by different circle offices, according to official sources.

In fact, at least one news report estimated that the fees will go up by as much as 40%. 

At any event, for Vodafone Idea, this is all academic, because it doesn’t have the money. Not even close. 

And this has put the Indian government in a sticky, sticky position. 

This is what The Economic Times reported—quoting a top government official. 

“Our dilemma is on one side we need to follow the Supreme Court’s order, secondly, take money from telcos and thirdly, keep them alive. But our stand is very clear, the government doesn’t want a monopoly in this country,” the person said. “There is so much financial pressure and such stress in the sector… We have to find a solution keeping all this in mind. The DoT is exploring all possible ways to find a solution, which includes deferment of dues to the government other than AGR.”

So many objectives, trade-offs, rules, and motivations. So much game theory. 

Somebody just make this into a board game already. Call it Duopoly. Or Settlers of Telecom. 

What makes matters worse is because there’s no clear policy or rules on the way ahead, rumours fly. News becomes speculation. Statements are read carefully. Meetings are covered with enthusiasm. Nobody knows what’s going to happen because nobody has bothered to define what will happen. 

Just look at Vodafone’s stock price, which is on its own acid trip. 

This is how it looked like over the last week. 

This is how it moved over the last month

And this is how it moved over the last 6 months

The problem with Vodafone Idea is that the future of the company has nothing to do with its revenues, or its financial health, its strategy, or laws and regulations.

It all comes down to what the Indian government wants to do.

Look, we can ask ourselves how we got ourselves into this mess. 

But a more interesting question would be—why didn’t Vodafone do anything about it?

Think about it. The Adjusted Gross Revenue litigation has been fought since 2003. In fact, things were so complex that even government agencies didn’t agree with each other. What did Vodafone do at that time? Did it speak up? Aggressively push back? Run a compelling PR campaign? 

Not really. The company was mostly… silent. It let things take their course. 

And it’s not entirely clear why. 

Perhaps it believed that an open war was unnecessary, because it had made the largest foreign direct investment in India’s history, and that this gave it a certain level of protection. Perhaps it’s because it wasn’t a local company, and was operating in unfamiliar territory. Perhaps it believed that backchannel talks (which were presumably on) were sufficient, and that things would never get to where they are today. 

However, one does wonder. Would things have been different had Vodafone fought earlier?


Amazon does not want to be Vodafone

If you think about it, Amazon is: 

  • A foreign company in India
  • which has invested a lot of money 
  • in a sector with ambiguous and developing regulation
  • in a market where the other prominent company is an ‘Indian’ one i.e, Flipkart
  • while Reliance builds its arsenal to launch a massive competitor.

In other words, Amazon is probably where Vodafone was, say, five years ago

And it seems determined not to make the same mistakes that Vodafone did. 

Here’s an example. 

Last week, Amazon decided to voice its opposition on a proposed tax on third-party sellers on their platforms. If levied, every seller on the platform would have to pay a 1% tax on each sale. Remember, tax revenues are down in India, so the government is trying to do all it can. But that’s not all. 

Look who else is involved

Another influential lobby group, the U.S.-India Strategic Partnership Forum (USISPF), is asking the government to give e-commerce firms more time to comply with the tax proposal. It wants the implementation of the new tax to be deferred to April 1, 2021 or later, according to a copy of its proposal reviewed by Reuters.

Also, remember the $1 billion investment by Amazon? 

The has company categorically said that it will not be used to fund discounts. 

It’s not just what Amazon is saying, it’s how it’s saying it. Smbhav, the Amazon India event for small and medium businesses where Jeff Bezos came down to India, happened nearly a month ago. But Amazon still hasn’t  stopped talking about it. Just do a Google search, and you’ll still see it on your News. With articles being published as recently as last week. And videos. 

That’s not an accident. That’s aggressive, sustained PR by a company determined to build a narrative, and define it. 

There’s some evidence that it’s working. And others are joining. Remember the Karnataka High Court judgement last week, in favour of Amazon against the Competition Commission of India (CCI)?

Guess who has joined the party

Walmart’s Flipkart has filed a legal challenge against an antitrust investigation ordered against the company in India, a court filing seen by Reuters showed, following a similar petition by its rival Amazon.com Inc.

The Competition Commission of India (CCI) in January ordered a probe into alleged violations of competition law and certain discounting practices by the two e-commerce giants, but a state court put the investigation on hold last week following a challenge by Amazon.

Nobody wants to be the next Vodafone. 


Aadhaar is everywhere 

India’s controversial national identity indicator, Aadhaar, gets more… complicated. For a long time, Aadhaar was pushed as the single thing to link everything if you lived in India, from phone numbers to bank accounts. Then a Supreme Court ruling changed that. 

Now, over the last two weeks, that’s changing. 

But there’s one thing that the Aadhaar will never become. Which, strangely, is proof of your nationality

 Over 120 citizens of the city were sent notices by Unique Identification Authority of India (UIDAI) urging them to prove their citizenship while alleging that they obtained Aadhar through illegal means.

The notices were issued after reports from the police, UIDAI said.

The best way to describe this is—Aadhaar is like salt. You need to have it in everything. Else the thing is bland and incomplete. 

But by itself, it’s useless. It can’t be eaten. It has no power. 

And it means nothing. 

Aadhaar is salt. 


IRCTC destroys all other mousetraps

There was a strange article at The Economic Times last week

More Tatkal tickets will be made available for passengers now as the railways has weeded out illegal softwares and arrested 60 agents who would use them to block such tickets, a top official said on Tuesday.

Railway Protection Force (RPF) Director General Arun Kumar said the cleansing operation means Tatkal tickets would be available for passengers for hours now, compared to a minute or two earlier after the booking opens.

If you don’t know, Tatkal tickets are a special category of tickets available on Indian railways for last minute bookings. Typically, a certain number of seats are set aside in this quota, and bookings open a day before the travel date. 

Oh, also, let me remind you that the Indian Railways Catering and Tourism Corporation (IRCTC) has a monopoly on railway ticket bookings in India.

Which is what made the above article strange. 

Why exactly does IRCTC care if third-party software is being used to book tickets on IRCTC? Ostensibly one that is better than IRCTC’s website. It makes no additional revenue from weeding them out. If anything, IRCTC should consider buying that software if it improves efficiency for a purchaser. 

Then I saw this, later down in the article. 

Officials explained that illegal softwares such as ‘ANMS’, ‘MAC’ and ‘Jaguar’ would bypass the IRCTC’s login captcha, booking captcha and bank OTP to generate tickets, while a genuine user has to go through all these processes.

The booking process for a general user usually takes around 2.55 minutes, but those using these softwares could do it in just around 1.48 minutes, they explained.

Weird. 

So I went to the IRCTC website, just to check out their captcha. 

Here’s what I found.

That’s not a banner ad for Amazon. 

That’s a captcha. 

Which is also a banner ad for Amazon. 

It’s pretty ingenious. And it’s done by a company called NLP Captcha, which, on its website, claims to:

…provide an engaging Captcha for brands wherein the user engages with the brand by filling the brand message or engaging with the brand across its publisher reach to ensure two way real human engagement with the brand.

The brand message of advertiser is viewable as the user has engaged with the same and he is paying for the users who have interacted with the brand.

That’s when it became apparent. 

That’s the real motivation for IRCTC. It isn’t blocking all this software just to make ‘more Tatkal tickets’ available for the rest of us. 

It’s doing it to protect its revenue. 

Quite interesting. 


The first law of unicorns

Over last week, Quikr, a classifieds company in India, lost its unicorn status, thanks to one of its Swedish investors.

In the same week, Dream 11, the  fantasy sports company, became one. Confirmed. 

Maybe there’s a law somewhere that the total number of unicorns in India is constant. 

Much like the Answer to the Ultimate Question of Life, The Universe, and Everything.

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