DoT gears up to penalise telcos over network roll-out delays

Even as the government contemplates the imposition of penalties worth over Rs 135 crore on old telcos that have not completed network roll-out in circles allotted to them, the Telecom Ministry is likely to issue showcause notices to new operators for similar lapses.

Sources in-the-know said the Department of Telecom (DoT) may decide on a report by the Telecom Regulatory Authority of India (TRAI) that recommended the cancellation of about 69 licences over non-fulfillment of roll-out obligations this week.

The allegations of irregularities in the allocation of 2G spectrum, which are estimated to have caused a revenue loss of over Rs 1.76 lakh crore to the exchequer as per the Comptroller and Auditor General of India, continue to disrupt Parliament proceedings, even as the case is probed by various agencies including the CBI, CVC and Enforcement Directorate.

The Telecom Ministry had earlier proposed imposing a penalty (or liquidated damages) of Rs 477 crore (which was later reduced to Rs 135.60 crore) against old operators, including Bharti Airtel, Tata Teleservices, RCom, Aircel and others.

The penalty was lowered after several representations by the old operators, who said that roll-out obligations should come into effect from the date of allotment of spectrum and not from the date of issuance of licences. They also claimed that statutory clearances came through late, which caused cascading delays in the roll-out of services.

As per the revised figures, Bharti Airtel faces a penalty of Rs 31 crore, while the Tatas (CDMA operations) are likely to be asked to be paid liquidated damages of over Rs 40 crore.

Meanwhile, the Department of Telecom (DoT) has asked its Telecom Enforcement Resource Monitoring (TERM) cell to collect data on the status of network roll-out by individual operators through field surveys.

This, the officials said, is done by the DoT on its own from time-to-time to ensure that the roll-out of services takes place as per the licence terms and conditions for effective utilisation of spectrum.

TRAI had last week submitted suo moto recommendations asking the government to cancel 69 new licences awarded to five operators, including Etisalat, Uninor and Videocon, by former Telecom Minister A Raja in January, 2008, as the licencees failed to roll out services at all, or only did an improper roll out.

Asked whether the DoT may initiate action to cancel the licences, sources said cancellation may not be a viable solution as this would cause hardship to the customers. Instead, new Telecom Minister Kapil Sibal may ask these firms to cough up more money to compensate the loss, if any, to the exchequer.

The regulator had recommended that the licences should be cancelled for at least 15 circles given to Etisalat, a company earlier known as Swan Telecom, which the CAG has dubbed as a front company of the Anil Ambani group, besides 10 circles given to Sistema-Shyam.

Sistema-Shyam, a JV between the Shyam Group and Russian giant Sistema, claims to have rolled out services in all 22 circles where it has licences, with over seven million subscribers in its kitty.

Similarly, Uninor -- a JV between Unitech and Telenor of Norway -- has rolled out services in 12 circles and is in the process of starting services in other areas.

As per the licence conditions, the licencees are required to roll-out services in 90 per cent of service areas falling in metros and 10 per cent in the district headquarters of other service areas within 12 months from the date of award of licences.

Among the old operators, besides Bharti, the Tatas and RCom, Aircel faces a penalty of Rs 28.85 crore, while HFCL is faced with liquidated damages of Rs 7 crore.

The two telecom PSUs -- BSNL and MTNL -- and Vodafone-Essar face no penalty.

"The cases for imposition of liquidated damages were processed since 2005 and showcause notices for imposition of liquidated damages (amounting to Rs 477.15 crore) were issued in 96 cases to 10 operators," highly placed sources said.

The DoT said that practically all service providers (prior to 2005) have defaulted on roll-out obligations, which indicates there is a need to re-look into the licence conditions.

Based on this premise, the DoT revisited the issue and came out with the much lower penalty figure of Rs 135.60 crore, compared to the original estimate of Rs 477 crore.