VSNL has also made it clear that ICO Global would have to bear part of the licence fee of 16 per cent of gross revenue to the Government. This would lead to the joint venture getting a smaller share of revenue accruing from the service.

VSNL has already invited bids from private telecom operators to set up a 50:50 joint venture for distributing the telephony services to be launched in the third quarter of 2000.

It is learnt that about six operators have already submitted their bids and these are being evaluated by an international consultant.

However, VSNL sources said the terms are being modified to lower the partner's revenue share. This is a direct fallout of high revenue sharing fee which the new entity would have to pay to the Centre.

VSNL was hoping that the Government wouldlevy a lower licence fee and has made a representation to this effect as well. It is for this reason that it is insisting that ICO bear part of the cost. "They have agreed to the proposal. However, now the entire schedule of revenue sharing for the venture needs to be reworked and we are informing bidders about the proposed changes. Those who agree to the new formula would obviously be shortlisted," said a VSNL official.

ICO Global has plans to offer its services in the country through the distribution arm in which it would not be holding a stake but will have a board seat.

VSNL, in any case, is the second-largest share holder in ICO Global with a 7 per cent stake through a $150 million investment in the project.

"The 16 per cent of revenue as licence fee is too high a figure considering the fact that it is going to be some time before revenue from satellite telephony is going to pick up and, more importantly, the hefty investments involved in putting in place such a network," said theofficial.

Satellite telephony is being viewed as a major business area for the future and a number of such projects are in the offing. VSNL has projected annual revenues of Rs 300-400 crore after a year of launching its joint venture to offer ICO Global's services in the country.

ICO, at a seminar recently organised in Mumbai, displayed its handsets. It has tied-up with six manufacturers and has placed orders for 400,000 handsets already.

Sources said the handsets are expected to be pegged at $700 while the service is expected to cost a consumer about $3 per minute as per current estimates.