DoT doubts Spice's eligibility for licences

In a setback to Spice Telecom, the government has put a question mark on the BK Modi-led firm's eligibility for licences in 20 circles on the ground that it may not have the required net worth as on the date of application.

Spice has licences for two circles, Punjab and Karnataka. Sources in the Department of Telecom (DoT) said the company had accumulated losses of Rs 657.25 crore according to its annual accounts on March 31, 2006. This will bring down the net worth of its promoters to Rs 514.23 crore.

The sources said the net worth may have gone down further in June 2006 and subsequently as pointed out by the access services wing of the DoT.

"In view of their inability to meet net worth requirement as on date of application they (Spice) are not eligible for unified access service licence (UASL) for 20 areas. They may be eligible for some service areas depending on the net worth of the company and their promoters if they provide the correct picture of their Profit & Loss Account," DoT said.

When contacted, Spice Telecom joint managing director Umang Das said the company had furnished most of the clarifications sought by the DoT and said they were within the policy guidelines of the government.

"There are certain technicalities... We are discussing with the concerned authorities and I am sure that the DoT will find that Spice Telecom is absolutely eligible for all the 20 circles," Das said.

The DoT has also raised doubts over foreign direct investment in Spice Telecom by Telecom Malaysia. According to sources, Foreign Investment Promotion Board (FIPB) clearance was obtained after the Indian company inducted the Malaysian partner.

Das, however, contested the objection raised by the DoT and said there was fair amount of clarity on this issue too.

"Our FDI is in accordance with the guidelines of the government as mentioned in Press Note 5. We have submitted clarifications on this issue also to the government."

Last week, the company had offered to pay the required licence fee along with stipulated bank and performance guarantees to the government and asked for licences in 20 circles. The company had also dared the government not to allot spectrum to others by jumping the priority list.

The DoT, sources said, had sought clarifications from the Department of Industrial Policy and Promotion on Spice Telecom's FDI induction to ensure whether the company met all the regulations.

The DoT has also sought clarifications from some other applicants.

Sources said the government may start issuing Letters of Intent (LoIs) to the eligible applicants this week.