5 Basic Loi Holders Ready To Sign Licence, Interconnect Pacts

Five basic telecom companies holding letters of intent (LoIs) are expected to sign the licence and interconnect agreements before the end of June. This follows a `joint letter of consent signed between the department of telecommunications (DoT) and three operators who have challenged a DoT move to encash their bank guarantees.

Under the terms of the letter expected to give the final leg-up to the three-year-old basic telecom deregulation process in the country the companies and DoT will jointly work towards a settlement of all contentious issues.

The companies are the R P Goenka group-led Basic Teleservices, the LoI holder in Tamil Nadu; Essar Commvision holding the LoI in Punjab; and Techno Telecom of the Usha group which has the LoI for Bihar.

 

Department officials were not willing to reveal details of the letter because the matter is still technically sub-judice. But, sources say, it will lead to the companies withdrawing cases from the Delhi High Court and, simultaneously, DoT retracting its letters to banks asking for an encashment of the bank guarantees.

Basic Teleservices moved the court in October last year, while Essar Commvision and Techno Telecom followed suit in January this year.

The two other operators which are likely to sign the agreements soon are Tata Teleservices and Hughes Ispat. The Tata joint venture with Bell Canada and American International Group holds the LoI for Andhra Pradesh and the telecom company from the Mittals Nippon Denro stable for both Maharashtra and Karnataka.

All the five companies have been involved in hectic parleys with financiers and equipment vendors, which sources say, is indicative of an early wrapping of the licence.

For instance, the equipment vendors for at least two circles have been finalised and are waiting to be signed.

Hughes Ispat has contracted an Alcatel-Hughes Electronics consortium to supply equipment for its Maharashtra circle.

Similarly, Basic Teleservices is reported to be close to finalising a deal with Siemens and Fujitsu. Both the deals are worth some $500 million (Rs 1,800 crore) each.

Essar Commvision a 90:10 joint venture between the Ruias and Bell Atlantic is also reported to be close to finalising an equipment deal with a Fujitsu-Motorola combination and Tata Teleservices with Lucent Technologies.

Techno Telecom has just started discussions with its vendors. Sources say Alcatel, which supplied an associate company (Koshika Telecom) with cellular equipment, is the frontrunner for the deal.

The basic telecom deregulation process until now pathetically lethargic has been hastened by the pathbreaking proposals announced by the government earlier this year.

Telecom companies were categorised under infrastructure resulting in a near-zero tax outgo through the project life, licence fees were allowed to be amortised, the external commercial borrowings ceiling was raised to 50 per cent of project cost and assignability of the licence allowed.

The prodding by the finance ministry egged on by the carrot of over Rs 40,000 crore licence fee in 15 years has more than helped.

Bharti Telenet, the Madhya Pradesh licensee, and Reliance Telecom holding the Gujarat licence have already committed over Rs 4,000 crore in licence levies.

Telelink Networks, the highest bidder for Rajasthan, is expected to be issued an LoI soon.