Will not cancel licences of errant firms: DoT

There are ways to recover lost revenue, says telecom ministry.

The department of telecommunications (DoT) has decided not to cancel licences issued to new operators.

“Telecom is an important industry. It gives the country the highest revenues. Cancelling licences is not a solution. If the government has lost revenue, we will find ways to recover it,” a top official in the telecom ministry said today.
 

TELCO TANGLE

• New firms spent '22k cr on equity capital or networks 
• Dual-tech firms Tata Tele & RCom spent over '20k cr
• New licensees have 32 mn subscribers, 5% marketshare
• Spectrum of 69 licences at 3G prices can fetch govt '39k cr

The official was responding to the comptroller & auditor general (CAG) report, which indicted DoT for issuing licences to operators, who failed to meet requisite preconditions or misrepresented facts. This led to a loss of Rs 1.76 lakh crore to the national exchequer.

The ministry’s response comes after the Telecom Regulatory Authority of India (Trai) recommended the cancellation of 69 of the 127 licences issued since 2006 for the failure by operators to meet roll-out obligations or for providing poor service.

“The government will find various options to recover the potential loss in revenue, by issuing new licences to mobile players in 2008 at prices fixed in 2001,” pointed out the official. He added that the issue would be dealt transparently, while maintaining a level playing field.

The signals from DoT are significant. New operators like Uninor, Sistema, Etisalat-DB, Loop Telecom and Videocon, who are among those under the cloud of licence cancellations, have already invested over Rs 22,000 crore in either subscribing to the equity capital of telcos or in building their networks.

This, of course, does not include the over Rs 20,000 crore investments made by dual-technology players like Tata Teleservices and Reliance Communications, who have also come under scrutiny by CAG. With a customer base of over 32 million, the new operators have already garnered around 5 per cent of the mobile marketshare.

However, if the government was to go by the Trai recommendations and redistribute the spectrum of the 69 licences of errant telcos at 3G prices, it would earn a Rs 38,859-crore bonanza. That figure is still an impressive Rs 18,759 crore if the spectrum of only the 38 licences of roll-out defaulters is redistributed.

Under current rules, operators must start services in 10 per cent of district headquarters and towns in a circle within one year of receiving spectrum. Trai has also pulled up 31 other licensees for poor coverage.