Raja opens exit door for new telecom cos
NEW DELHI: The government was open to providing an exit route to new mobile phone companies that were given licences and airwaves under controversial circumstances two years ago, the minister at the heart of the furore over telecom policy said on Tuesday.
The minister, A Raja, said details of the new policy would be decided by the Telecom Commission, the highest decision-making body in the communications ministry.
The circumstances under which these companies emerged winners in 2008 has resulted in allegations that the exchequer had been deprived of thousands of crores of revenue. On Monday, the Supreme Court issued a notice to Mr Raja, giving him 10 days to respond to charges that the mobile telephony licences issued by his ministry cost the government Rs 70,000 crore. Mr Raja has strongly denied any wrong doing, and has asserted that all his decisions had the backing of the Union Cabinet.
ET had reported last week that the telecom department was considering to allow telecom companies with licences from 2008 to sell out or merge, paving the way for a possible consolidation in the 14-player domestic telecom market.
Many of the new entrants are battling for survival, as the tariff wars in India’s ultra-competitive mobile market have significantly lowered the average revenue per user, making their businesses unviable. These companies, which include Videocon, Sistema Shyam, Uninor, Loop, S Tel, Etisalat DB and Allianz Infratech, have struggled with their rollout plans, and for those who have launched services, the growth in the number of subscribers has slowed down to a trickle.
Mr Raja has, however, asserted that the new companies had increased competition and helped bring down prices.
On Tuesday, a telecom industry veteran said the ‘bailout’ plans were flawed. “Any bailout will be a double whammy for the government. It will result in double corruption, as some companies have cashed out. Mr Raja sold mobile permits for cheap citing competition, but none of the new entrants were a factor in the increased competition that the sector witnessed,” said BK Syngal, senior principal at Dua Consulting and former chairman of VSNL, a long-distance operator now owned by the Tata Group.
He said the Centre must recover financial liabilities from the new companies before considering any exit options for them. “These companies squatted on a scarce national resource. If they had launched services, the government would have got several thousand crores in service tax, licence fee and spectrum charges from these operators,” Mr Syngal added.
The DoT is examining several possibilities, including allowing new companies to merge with larger operators, shortening the three-year period during which the promoter of a new company cannot sell out and relaxing rules to allow incumbents to retain airwaves held by these new companies if a buyout or merger were to happen.
The minister, A Raja, said details of the new policy would be decided by the Telecom Commission, the highest decision-making body in the communications ministry.
The circumstances under which these companies emerged winners in 2008 has resulted in allegations that the exchequer had been deprived of thousands of crores of revenue. On Monday, the Supreme Court issued a notice to Mr Raja, giving him 10 days to respond to charges that the mobile telephony licences issued by his ministry cost the government Rs 70,000 crore. Mr Raja has strongly denied any wrong doing, and has asserted that all his decisions had the backing of the Union Cabinet.
ET had reported last week that the telecom department was considering to allow telecom companies with licences from 2008 to sell out or merge, paving the way for a possible consolidation in the 14-player domestic telecom market.
Many of the new entrants are battling for survival, as the tariff wars in India’s ultra-competitive mobile market have significantly lowered the average revenue per user, making their businesses unviable. These companies, which include Videocon, Sistema Shyam, Uninor, Loop, S Tel, Etisalat DB and Allianz Infratech, have struggled with their rollout plans, and for those who have launched services, the growth in the number of subscribers has slowed down to a trickle.
Mr Raja has, however, asserted that the new companies had increased competition and helped bring down prices.
On Tuesday, a telecom industry veteran said the ‘bailout’ plans were flawed. “Any bailout will be a double whammy for the government. It will result in double corruption, as some companies have cashed out. Mr Raja sold mobile permits for cheap citing competition, but none of the new entrants were a factor in the increased competition that the sector witnessed,” said BK Syngal, senior principal at Dua Consulting and former chairman of VSNL, a long-distance operator now owned by the Tata Group.
He said the Centre must recover financial liabilities from the new companies before considering any exit options for them. “These companies squatted on a scarce national resource. If they had launched services, the government would have got several thousand crores in service tax, licence fee and spectrum charges from these operators,” Mr Syngal added.
The DoT is examining several possibilities, including allowing new companies to merge with larger operators, shortening the three-year period during which the promoter of a new company cannot sell out and relaxing rules to allow incumbents to retain airwaves held by these new companies if a buyout or merger were to happen.
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