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New telecom package allows revenue sharing

ENS ECONOMIC BUREAU

NEW DELHI, JULY 6: After two years of dilly-dallying and keeping the telecom industry on tenterhooks the government today finally decided to allow all private sector operators in the field of cellular, basic, paging and other value added services to move to a revenue sharing arrangement in place of the present regime of licence fees. While agreeing to most of the demands of private operators, the government however turned down the request of its own Department of Telecommunications (DoT) for setting up a Telecom Development Fund (TDF) for meeting the investment needs of the sector.

The Cabinet has approved, apart from a revenue sharing formula, an across the board extension of the effective date for licenses for basic and cellular operators by six months, costing the exchequer Rs 1,444 crore. This will give private companies a one-time 50 per cent off on their annual licence commitments. In return, the Cabinet has said that the companies will have to accept the entire package in toto and withdraw all legalproceedings against the government before moving to the new regime. The Cabinet has kept August 1 as the effective date for migration from the old licence fee arrangement under the National Telecom Policy of 1994 for basic and cellular operators, to the new revenue sharing arrangement under the National Telecom Policy of 1999 announced in March earlier this year.

The private companies will have to pay the licence fees till July 31, this year. The relief given to them in this regard is that they would have to pay 15 per cent of their dues upfront by August 15. The remaining will have to be secured against bank guarantees by the companies and finally cleared by January 31 next year.

The transition would be allowed for operators only if both operators in a circle agree to move to the new arrangement to allow multipoly. The Cabinet decision states that the Ministry of Communications will work out the details of the modalities of the present package in consultation with the Telecom Regulatory Authority ofIndia (TRAI). If the TRAI recommendations are not available before July 31, an interim revenue sharing pegged at 15 per cent of gross revenue would be charged to operators. This would be later adjusted as per the decision reached in consultation with the TRAI.

In the field of cellular services, the cabinet note says that DoT and MTNL would be allowed to enter in the field of cellular services. However, the entry of the fourth operator would be done on the recommendation of the TRAI and availability of the frequency spectrum. The Cabinet has decided to set a five year lock-in period from the date of the licence agreement during which present promoters would be banned from selling any part of their equity.

The dawn of a new regime