Dot In Dilemma Over Licence Fee Deferment

Lack of credibility of operators makes it apprehensive

The department of telecommunications (DoT) is in a dilemma over the demand of cellular operators to defer the payment of second and third years licence fees. The DoT brass has taken a positive view of the issue, but what they call lack of credibility of private operators is holding them back.

If we extend the date of licence fee payment, they (the private operators) may not pay even at the new date and file a case in a high court or before the Telecom Regulatory Authority of India (TRAI), resulting in prolonged litigation, say officials, although they acknowledge that deferment will provide a much-needed relief to the industry and private cellular operators will be in a better financial state after a couple of years, once the market has developed properly. Only five cellular service providers have paid the second tranche of the second years licence fee. The payment was due in February this year. Fascel and JT Mobiles have filed petitions before TRAI seeking deferment of the payment.

However, cellular operators say they are unable to pay the extremely high licence fees because their finances are in a shambles, thanks to roadblocks created by DoT. They (DoT officials) have delayed various clearances. Besides, the arbitrary hike in fixed-to-cellular tariff, although it has been quashed by TRAI, threw our plans haywire, say the operators. Another factor that has led to the government losing faith in private operators is their reluctance to furnish corporate guarantee for loans from financial institutions.

This, department officials feel, is indicative of the risk-averse nature of the companies. There is obviously big money in the cellular industry. That is why Indian as well as foreign companies are ready to pump in funds. But they (the operators) do not want to furnish corporate guarantee against loans. They want the lenders to bear all the risk, say DoT officials.

DoT is also miffed that the operators raised such a hue and cry over the hike in fixed-to-cellular call tariff. The issue could have been solved much more quietly, say officials.

The Cellular Operators Association of India, in a letter to the Telecom Commission chairman last month, had sought deferment of the licence fee citing difficulties encountered by circle operators in achieving financial closure.

In the absence of special support from the government, many could fall by the wayside and become BIFR (Board for Industrial & Financial Reconstruction) cases, said the letter.

The association proposed that the overall net present value of the licence fee payable be maintained in the revised payment schedule by raising the tranche to be paid later by factoring in an interest rate of about 16 per cent.

Since the last date of licence fee payment for the second quarter of the second year is already past, COAI proposed that the deferred period be valid from the remaining two quarters of the second year and up to the fourth year, including the first two quarters of the fourth year. From the fourth year to the end of the licence tenure, a constant yearly payment has been proposed.

The operators have also requested that post-dated cheques lying with DoT be returned to the licensees if the revised payment schedule is accepted.