Assignability Pact May Cover Cellular Operators

The assignability agreement reached between the department of telecommunications (DoT) and basic telephone operators, wherein financial institutions (FIs) would have the first right to pick a new operator if the existing licensee defaulted on payment of dues, is likely to be applied to cellular operators, too.

The Indian Paging Services Association has written to the department seeking the same assignability. A senior official of the department said no decision on the request had been taken yet, but sources in the industry say the DoT brass is favourably inclined. Under the assignability pact, the DoT and basic telecom operators had on Tuesday also agreed that the licence would be withdrawn if a basic operator transferred his rights or entered into an agreement for sub-licence or partnership with a third party without the DoTs prior written consent.

 

The agreement paves the way for funding of basic telecom projects by FIs.

Many basic services companies including Essar (Punjab circle), Usha (Bihar), RPG Group (Tamil Nadu), Tata Group (Andhra Pradesh) and Reliance (Gujarat) have been unable to set up the required infrastructure due to the reluctance of FIs to fund the projects.

Cellular operators say the agreement is not very satisfactory, but we are ready to sign it with some changes, because we have reached the stage when we badly need funding from financial institutions.

We are not interested in assigning the licence, but without the agreement, we cannot get loans from financial institutions, said a source in the cellular industry.

A cellular telecom analyst said the principle could remain the same, but the content would have to be modified because the commercial conditions involved in basic and cellular licences were different.

For example, 90 per cent of the capital expenditure investment in network, equipment, and other infrastructure by cellular operators has to be made in the first three years. But, basic operators have a much smoother ride and the time-frame for them is six-seven years.

Besides, the roll-out conditions, financing norms, and revenue and profitability projection were different for the two services, said the analyst.

The cellular telecom industry is not very happy that the DoT gave first priority to evolving an assignability pact with basic telecom operators even though they have not started operations yet. Cellular services in the country commenced in 1996. The Indian Paging Services Association, in a letter to Telecom Commission chairman A V Gokak, has said: The financial institutions have now started realising that the licences issued by the government of India have value, and are willing to treat the same as security... (FIs) have started proposing that they may be able to finance some of the paging projects provided the assignability, currently there for basic licences, is also extended to radio paging services.