Sistema Shyam may pay DoT for missing rollout obligations

By Tejeesh NS Behl Dec 20 2010

Tags: Company, Telecommunication

 

Sistema Shyam Teleservices (SSTL), which operates the MTS brand of mobile telephony, is likely to pay the

liquidity damages impo­sed on it by the department of telecommunications (Do­T) for not meeting rollout obligations within the stipulated time frame, a company official with direct knowledge of the development told Financial Chronicle on condition of anonymity.

“The total amount of liquidity damages for all the concerned circles works out to Rs 11 crore and it is possible we might just decide to pay up and get on with our rollout,” said the official.

He said it was also likely that other telecom companies who had been asked to pay liquidity damages for not meeting rollout obligations would follow suit.

According to telecom minister Kapil Sibal, there were 119 cases of violations of rollout obligations. The Telecom Regulatory Authority of India (Trai), in a letter to DoT, had named nine companies, including SSTL, that did not meet rollout obligations and had recommended punitive action against each depending on the quantum of delay. The other companies were Uninor, Etisalat DB, Loop Telecom, S Tel, Tata Teleservices (TTSL), Videocon, Vodafone Essar and Aircel/Dishnet.

Trai had said that SSTL had not started services in 10 circles –– Gujarat, Punjab, UP West, UP East, Madhya Pradesh, Himachal Pradesh, Orissa, Assam, the Northeast and Jammu & Kashmir. For such cases, which Trai has categorised as D2, meaning the telecom operator has not started services despite registering with the telecom enforcement, resource and monitoring cell, the regulator has recommended outright cancellation of licence. In addition, Trai said the telecom company had rolled out services in West Bengal in only two districts.

As per the licence agreement, a telecom operator is liable to pay a weekly penalty of Rs 5 lakh for the first 13 weeks of delay in rollout, Rs 10 lakh each for the next 13 weeks and Rs 20 lakh each up to the next 26 weeks, subject to a maximum of Rs 7 crore per week. The DoT had said that they could also consider cancelling a licence in certain cases where rollout obligations were not met.

Vsevolod Rozanov, president and CEO of SSTL, confirmed that DoT had asked the company to pay liquidity damages. “Yes, we have received a notice from the DoT last week and we will respond to it,” he said. He, however, declined to clarify whether the company had delayed rollout in certain circles and whether it would pay the liquidity damages. “Let me keep it between us and the regulator,” he said.

Each company has been given 15 days to pay liquidity damages, failing which licences could be cancelled and the companies would have to shell out fines with interest.