Worldtel Close To Signing $1billion Deals In China, Pak & Africa

Even as the department of telecommunications (DoT) dithers on a $2 billion (about Rs 7,200 crore) WorldTel proposal for developing basic telecom services in India, the telecom financial institution is close to signing a $100 million equity deal in Mexico.

WorldTel is also in the final stages of negotiating basic telecom deals worth over $1 billion (Rs 3,600 crore) in China, Pakistan and African countries like Kenya, Uganda, Tanzania and Zimbabwe. Most of these projects involve basic telecom switching and local networks while one of them is for setting up a long-distance transmission network.

The chairman and chief executive officer of WorldTel, Sam G Pitroda, said India was not on the top of the list of countries in which WorldTel planned to invest. We gave them (DoT) a proposal for $2 billion. The project proposal was for $3 billion. Wed bring in $2 billion and theyd have to raise just $1 billion; but they have not responded yet, he said explaining why WorldTel was not actively interested in India.

 

Officially, DoT has deferred a final decision on the WorldTel proposal, but insiders privately admit that it has been effectively shelved. The WorldTel proposal for India envisaged setting up basic telecom networks in three states Uttar Pradesh (East), Kerala and West Bengal. The Uttar Pradesh (East) project was to have cost $1.2 billion, with the remaining $1.8 billion to be accounted by the other two states.All three states have long waiting lists of subscribers and licence fee tags (set by DoT) which are perceived to be unviable by the private sector. The states did not receive any quotes in the three rounds of bidding held over the last two years. Kerala has a waiting list of over six lakh, West Bengal 1.5 lakh and Uttar Pradesh (East) about a lakh.

The biggest hurdle to clearing the WorldTel proposal was the refusal of the telecom finance institution to pay licence fees. According to its charter, WorldTel invests or undertakes projects which have an internal rate of return of between 20 to 25 per cent.

The financial institution has ruled out payment of licence fees, which would make returns from the Indian projects unattractive. It has also refused to fund projects being handled by others and insists on an equity presence in projects.

WorldTel is a International Telecommunications Union-supported institution based in London which finances (primarily basic telecom projects with a marked emphasis on roll-out of telephone lines in rural areas. Principal investors in the institution are GE Capital, American International Group, Kuwait Investments and Natwest Markets. The promoters had contributed to a $10 million seed capital of WorldTel which is expected to get enhanced as projects take off.

Our investors look at the quality of projects and long-term returns before committing money. We cant wait forever to hear from India. There are projects in other parts of the world, Pitroda said.

He led indigenous telecom technology development in the country while heading the Centre for Development of Telematics and chairing the Telecom Commission, the apex body in DoT.