Dot Calls Meet On Licence Fee Deferment

The department of telecommunications (DoT) has decided to convene a meeting with cellular operators, the finance ministry and representatives of the financial institutions to discuss rescheduling of the yearly licence fees. The meeting is expected to take place this month.

Early last month, the Cellular Operators Association of India (COAI) had requested a deferment of licence fees by two years and an extension of the licence period from ten years to 15 years.

Cellular companies, which have paid licence fees for the first year and the first two quarters of the second year, have averred that rescheduling the licence fee stream will help them tide over financial difficulties in the initial years of the project.

They have maintained that if a waiver of licence fees in the next two years is allowed, the pressure on finances will be considerably reduced. At present, huge licence fee commitments in the initial years have to be taken care through infusion of equity capital, since banks refuse to fund the levy which they feel is an intangible asset. If postponed by two years, cellular operators feel, the payment of licence fees can be taken through revenues that is expected to accrue in later years as number of subscribers grow.

For instance, a project with a licence tab of Rs 150 crore has to ensure a minimum subscriber base of over 75,000 subscribers assuming an average 200 minute per month usage just to take care of the licence fee.

Such threshold subscriber-base levels are not expected to be achieved until at least the second or third year in the circles. Apart from the licence fee, equipment and operational costs are also to be funded and companies feel deferment of licence fees by two years will help cash flows tremendously.

Even as cellular operators have requested a deferment of the licence fee monies, they have also assured the Department of Telecommunications that the levy in net present value (NPV) terms will not be less than what they have quoted. NPV is a financial term for the present value of a future stream of payments or receipts.

By saying that they would stick to their NPV licence fee commitments, cellular companies sought to assure the government that it wouldnt lose out by rescheduling the yearly licence fees.

In a meeting of the governments core group on infrastructure last month, DoT and finance ministry officials are learnt to have been sympathetic to the cellular companies demand, especially since they have assured the government to match the levy in NPV terms.

The government is keen to give the entry of private companies into telecom services a boost by relaxing some restrictive tender conditions.