Today's Paper

New package for cellular operators

NEW DELHI DEC. 24. In an apparent barter-deal, the Government today came out with major concessions for cellular operators at an annual cost of Rs. 960 crores. The industry, meanwhile, announced its decision not to pursue the case against WLL mobile and unified access licence regime now pending in the Supreme Court.

Announcing the package which is designed to compensate the cellular operators for the high licence fee, the Communications Minister, Arun Shourie, said the fee had been cut by two percentage points across the board from 12, 10 and 8 per cent.

In addition, another 2-percentage points reduction in revenue share will be granted to first and second cellular licencees for a period of four years.

However, the minimum licence fee had been pegged at five per cent of the Gross Adjusted Revenue, which would go towards the Universal Service Obligation (USO) fund, he said.

The package would come into effect from April 1, 2004.

The Ministry has also revived its earlier proposal to hike foreign investment in the telecom sector to 74 per cent from the existing 49 per cent with direct investment remaining at 49 per cent. The additional investment will have to be routed through Foreign Institutional Investors (FIIs).

Indicating that the Ministry would take this renewed proposal to the Cabinet soon, Mr. Shourie asserted that the announcement of the package was preceded by its approval in entirety by the Prime Minister, Atal Bihari Vajpayee, yesterday.

The Minister said the Government had estimated a loss in revenue to the tune of Rs. 885 crores during 2004-05 of which Rs. 225 crores benefit would accrue to private operators, Rs. 560 crores to BSNL and Rs. 100 crores to MTNL. The additional benefit of two percentage points to the cellular industry would cause a loss in revenue of Rs. 83 crores annually and Rs. 332 crores over a period of four years.

It has been made clear that the benefit of additional two percentage points would be extended only to the operators offering services in the circles and not in the four metros.

For instance, the Sunil Mittal-owned Bharti Group would not get this benefit for its licence in Delhi. Similarly other operators in the four metros will not be eligible for this concession. However, they would benefit from the concession in relation to their operations in other circles outside the four metros.

The Ministry of Finance will act as a facilitator for a dialogue of cellular companies in financial distress with FIs for debt relief measures, the Minister said.

Closely questioned as to whether the package was offered with a condition that the cellular operators should commit to withdraw the WLL case, the Minister emphatically said, "there was no condition from either side."

In the context of the renewal of the proposal for raising the FDI limit, Mr. Shourie said a revised version had been submitted to the Deputy Prime Minister, Mr. L.K. Advani. It had taken note of the reservations expressed by intelligence agencies in relation to the original proposal, he said.

Maintaining that the Government had been talking to various operators to lower the temperature in the industry and to ensure that the sector attracted investments, he said that three items out of the package — relating to FDI, merger and acquisition and debt restructuring — would be subject to Cabinet clearance, while the lowering of the licence fee would be approved by the Ministries of Communication and Finance jointly.

In a statement circulated at the venue of Mr. Shourie's press conference, the Cellular Operators Association of India appreciated the sympathetic attitude of the Government towards issues raised by them and announced their commitment not to persist with the case filed by them in the Supreme Court.

Asserting that it would not only withdraw the ongoing litigation, the association said that it would work with the Government for a healthy and viable cellular mobile industry and would not support an operator who may have reservations in relation to their decision to discontinue the case.

While Mr. Shourie aired optimism about the cellular and basic telecom operators who had been at loggerheads, coming together and working in tandem with the Government to create world-class services and telecom infrastructure, Sunil Mittal of the Bharati Group said the clashing representative associations should now merge. "Well the merger now may come about,'' remarked another operator present there.

Recommended for you