Basic Cos May Seek More Time To Pay Fee

The five basic telecom companies holding letters of intent (LoIs) for the right to operate basic telecom services in six circles are likely to ask for an extension of the deadline of September 30, set by the department of telecommunications (DoT), to sign licence and interconnect agreements. This became evident after a meeting of representatives of the companies held here on Thursday.

The LoI-holders are likely to ask for an extension between 10 weeks to three months because they have not been able to tie up finances for their projects yet, sources said. The companies are: Tata Teleservices for Andhra Pradesh, Essar Commvision (Punjab), Hughes Ispat (Maharashtra and Karnataka), RPG-led Basic Teleservices (Tamil Nadu) and Usha groups Techno Telecom (Bihar).

Sources added that there was a possibility that Hughes Ispat may sign the licence and interconnect agreements for one circle (most likely, Karnataka which has a lower licence fee tag compared to Maharashtra). Two companies - Basic Teleservices and Techno Telecom - have not received copies of the pacts yet.

Both the companies have cases against DoT pending in the Delhi High Court. They have challenged a move by DoT to encash their bank guarantees after they refused to accept LoIs late last year.

Top executives of the companies said there was no question of signing the pacts since they had not received copies. We have taken legal advice and are sure of our position, one source said.

The delay on part of DoT to send a copy of the tripartite agreement (between the operating company, lender and DoT) on assignability of licences was also cited by sources as a hurdle in way of signing the agreements. The final tripartite agreement has not been sent to the LoI-holders yet, although both financiers and the companies are aware of the contents.

Yes, we know what it (the tripartite agreement) contains. But, we have to send a final copy to our banks and other lenders before they commit finances, a source said. Tata Teleservices and Essar Commvision are likely to ask for a two-month extension.

It is not known whether DoT will accede to the companies request for an extension of the deadline. While it is unlikely to scrap the LoIs of the companies and encash their bank guarantees given the Rs 41,000 crore involved in licence fees, the department may insist on penalties - five per cent over the prime lending rate - on the licence fee amount from September 30.