Telecom Licences Unlikely To Be Made Assignable

This has been one of the main demands of telecom companies and financial institutions who are contemplating funding such projects. They have been asking for an assignability clause in the licence agreement so that if the licensee company defaults on loan repayments or in case of bankruptcy, the licences can be assigned to the FIs who can in turn auction them.

The likelihood of giving assignability status to the telecom licences is low, a department of telecommunications official confirmed here yesterday. He was referring to Verma's answer to the starred question in Rajya Sabha. Two members of Parliament, Dipankar Mukherjee and Nilotpal Basu, wanted to know whether the successful bidder companies for basic telecom services were demanding that the licences be treated as an asset and the right to transfer them.

 

In his reply, Verma said the basic telecom bidders had been requesting for allowing assignability of the licences to FIs. But, the demand for transfer of licences had not been agreed since it is in violation of the tender conditions, he added.

Telecom sources point out that by saying that transfer of licences were in violation of the tender conditions, the minister has virtually closed the assignability option. Assignability is defined as the making over of any right to another; which in other words means a transfer of the right (the licence, in this case).

Telecom sources hope this is just a technicality that DoT officials will ignore, since the practice of assigning a telecom licence to funding institutions is prevalent practice worldwide. Assignability is just a technicality that FIs insist on in the case of an eventuality of bankruptcy, one telecom expert said.

In reply to another question in Parliament on Wednesday, Verma clarified that DoT had not received requests from basic telecom bidders to set up holding companies with foreign equity. He clarified the change of domestic and foreign partners in cellular telecom companies allowed by DoT was allowed by the tender guidelines.

In order to give further flexibility, the change of foreign partner(s) was allowed if the new foreign partner(s) was found stronger in networth and better in experience of cellular network operation subject to no objection from the old foreign partner(s) and subsequent FIPB approval. As regards to change of Indian partner(s), the change was permitted if the new Indian promoter company was a subsidiary company (minimum 51 per cent holding of the old Indian promoter), Verma said.