Srinivas Cellcom Offers Rs 85cr For Tn Cellular Licence

Srinivas Cellcom of the Chennai-based Sterling group has written to the department of telecoms that it is willing to pick up the Tamil Nadu cellular telecom services licence. It has offered to pay Rs 85 crore which includes the first years licence fees, financial and performance guarantees.

DoT is likely to take a decision on this in a week. Srinivas Cellcom made the offer after HHS Communications, one of the two cellular licensees in Tamil Nadu, refused to pay the Union government two instalments of licence fees and penalties totalling some Rs 190 crore. Srinivas has in fact considered going to court against DoT for the delay in issuing the license to the company which has been delayed for more than a year.

The Chennai companys letter gives an interesting twist to the Tamil Nadu cellular licence. DoT has maintained that the three-month extension given to HHS Communications last November was the last one. The company has been given extensions to pay the money since January 1996 when it accepted to pick up the licence.

Srinivas Cellcom has pointed out in its letter that BPL-US West, the other cellular licensee in the state, is being given an unfair advantage because of the delay caused by HHS Communications. The BPL company is already installing network hardware and will be given a lead in offering services, the letter says.

In the cellular services bidding process for 20 circles (mostly analogous to a state), Srinivas Cellcoms financial bid was ranked third behind BPL-US West and HHS Communications a joint venture between the Hindujas, HCL Ltd and Singapore Telecom (SingTel). The BPL-led company had quoted Rs 836 crore and the Hindujas-HCL-SingTel combine Rs 541 crore.

However, after DoT insisted that the second bidder should equal the first if it is to be awarded the licence, HHS Communications equalled the BPL-US West bid. This was, however, not acceptable to SingTel which decided to withdraw from the consortium. The Singapore major formally announced its decision to pull out of the venture earlier this week.

Meanwhile, HHS Communications refused to pay the government licence fees and penalties after it failed to rope in a new foreign partner before an extended deadline of February 28. In a letter to DoT in the last week of February, the company said Pele Communications Ltd (PCL) of Israel which has agreed in principle to invest in the project has revoked its decision because of the recently-introduced killer fixed-to-cellular tariffs.

DoT sought to increase charges for calls from fixed network telephones to cellphones from Rs 1.25 for a three-minute call to a maximum of Rs 28. Companies have complained that the new tariff upsets their revenue projections since more than 50 per cent of calls coming into cellphones are expected to come from fixed telephones.

DoT has limited options. Since HHS Comm has refused to pay the licence fee and penalties, the department will try to encash the companys bid guarantees. However, HHS Comm executives confirmed this would lead to litigation.