Unified licensing guidelines abolish cross-holding among telcos

Promoter shall mean legal entity other than central govt, financial and scheduled banks, which hold 10% or more equity in the licensee company

The department of telecommunications’ (DoT) committee on unified licensing (UL) has given a go-ahead to abolish cross-holding of equity among telecom operators having spectrum in the same service area.

According to the DoT’s final guidelines, no licensee or promoter can have any equity holding, directly or indirectly, in another spectrum-holding company in the same service area.

According to the new definition, a promoter is an entity other than the central government, financial and scheduled banks, which holds 10 per cent or more equity in the licensee company.

The existing unified access service licence norms allow promoters of a telecom company to have up to 10 per cent equity stake in another firm in the same circle.

Currently, many telecom firms have tie-ups and stake in other licensees. Such telcos have one year to comply with the new norms. According to analysts, a year is enough time for the telcos to get out of the existing arrangements.

Vodafone Plc, which has a majority stake in Vodafone India, holds a 4.4 per cent stake in Bharti Airtel. Last week, Vodafone India wrote to communications and IT minister Kapil Sibal that the new regulation will be a “disadvantage” for the British telco in India.

According to the new guidelines, all licensees will have to migrate to the UL, if they wish to expand the scope of their service to include any additional service or service area. In case of merger and acquisition by licensee with a telecom service provider that has not migrated to UL, the merged entity will have to migrate to UL.

Upon migration, the new UL shall be for a period of 20 years, irrespective of the validity period of the licence it already held.

However, the migration clause might require more clarity whether telcos would need to migrate now, or the licences expires, said an analyst with a management consulting firm.

UL is part of the government’s plan to adopt ‘One Nation – One Licence’ strategy. In the new licensing regime, spectrum will be de-linked from licences. While one company can only hold one licence, it can get permits for multiple services including access, internet, national long distance, international long distance, global mobile personal communication by satellite, public mobile radio trunking, VSAT closed-user group and INSAT.

Internet service providers migrating to the new UL can offer voice services using broadband wireless access spectrum, for an additional fee.

When existing licence expires, a licensee has to migrate to UL and obtain spectrum separately de-linked from UL.

There is an entry fee for the UL, which would be a maximum of Rs 15 crore. Besides, companies will have to pay annual licence fee of eight per cent of adjusted gross revenue for each circle. From the second year, the licence fee would be a minimum of 10 per cent of the entry fee of the respective authorised services and service area.

The UL will also allow companies to offer internet telephony through public internet by the use of personal computers or internet protocol (IP)-based customer premises equipment connecting to certain specified devices.

The UL guidelines also noted that the licensor (DoT) shall have the right to direct the licencee to warn, penalise or terminate the services of the franchisee or agent or distributor (which a licencee can offer with prior permission from DoT), after considering any report of conduct or antecedents detrimental to the security of the nation.