Raja: Govt may consider bailout for new 2G telcos

Communications Minister A Raja today said the Telecom Commission — the apex decision-making body in the Department of Telecommunications (DoT) — is discussing a “bailout” for eight new operators that received 2G licences in 2008. These operators have been under enormous financial strain due to a tariff war in the sector, and many of them have not been able to even roll out services.

Speaking to reporters on the sidelines of an industry conference here, Raja said, “At the last operators’ meeting, bailout provisions were highlighted. It will be discussed in the Telecom Commission.” However, the minister did not furnish any details of a possible bailout.

The move comes close on the heels of requests by at least three new operators, who have asked the government to take back the 4.4 MHz of start-up 2G spectrum and return the '1,650 crore they each forked out for a pan-India licence. However, current policy clearly states that if operators fail to roll out their services by a stipulated time, they could lose their licences and forfeit the fees.

Present regulations also stipulate a lock-in period of three years, which means several new operators will not be able to sell out before the beginning of next year. Some have also lobbied the government for a relaxation on rollout obligations, as they were finding it difficult to make the necessary investments. New operators have been reeling as a result of the ongoing tariff war, with 14 players slugging it out for a share of the market.

Industry experts say new operators are working on ARPUs of Rs 40-80 a month, compared with the industry average of Rs 130, making it very difficult for them to recover the cost of acquiring new customers, let alone their capital expenditure.

The operators include Uninor, Etilasat-DB, S-Tel, Datacom, Sistema-Shyam and Loop. RCom and Tata Teleservices were allowed to operate GSM services under their existing licences.

Shareholders in Norway’s Telenor group, for instance, which has 67.5 per cent equity in Uninor with the Unitech group, have demanded the management quit its bleeding Indian operations. The company’s Indian operations — launched just nine months ago — posted operating losses of $556 million.

Ironically, Raja and his departmental officials have been under CBI scrutiny for allegedly granting 2G licences at throwaway prices, allowing some operators to make big bucks.