Sunday, September 26, 2010

DoT to consult FinMin on bailout package for new telcos




Telecom Ministry has made it clear that a decision to bail out new telecom operators who want to surrender 2G licences along with spectrum will be taken in consultation with the Finance Ministry.The Telecom Commission, a decision-making body of the Telecom Ministry, would first consider the issue and if found viable, the Department of Telecom (DoT) would approach the Finance Ministry with the options available, senior DoT officials said.The government had issued new pan-India telecom licences bundled with start-up 2G spectrum to eight companies in January, 2008, for Rs. 1,651 crore each, but some of them have not been able to meet the roll-out obligations, which may prompt the government to either impose a penalty on them or cancel their licences.There are apprehensions that in case no option was given to the struggling operators, they might take legal course and that may result in locking of precious spectrum. However, the officials made it clear that no decision would be taken without consulting the Finance Ministry.Asked whether the issue may be referred to the Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee, officials said although no such decision was taken, this cannot be ruled out. According to sources, at least two new telecom licencees, including Swan Telecom (which has tied up with UAE-based Etisalat), have approached the DoT for surrendering the licences and spectrum they bagged two years ago in lieu of a refund of the entry fee they had paid.As many as eight players, including Swan, Uninor, Videocon-owned Datacom, Shyam-Sistema and Loop Telecom, had bagged spectrum in 2008 and several operators are yet to start their services.The official said the matter would be taken up by the Telecom Commission. The Commission may consider several possibilities, including allowing new companies to merge with larger operators and shortening the three-year lock-in period during which the promoter of a new company is barred from selling out.The current M&A norms restrict new telcos, who got pan-India licences and spectrum at Rs. 1,651 crore, from selling them. With 14 telecom players jostling in each circle, analysts feel that a shake-out is inevitable as the margins of telcos are under pressure due to a tariff war and falling average revenue per user.When asked who were the new players that had approached the DoT for surrendering spectrum, officials declined to give names, but confirmed that at least three new players have sought a refund in lieu of exiting the space.Among the new players, Shyam-Sistema has already rolled out services in several circles, while Uninor (a JV between Unitech and Telenor of Norway) has also started services in 13 circles and is in the process of covering other circles. Besides these two, S Tel has also almost covered its areas and the RCom and Tatas have also launched GSM services in most of the circles.