Koshika has the licences for running the cellular services in UP (East), UP (West), Bihar, and Orissa. Currently, all Koshika licences, apart from UP (East) have been cancelled by the Government, for non-payment of licence fee dues.

According to DoT officials: "Why should we allow Koshika to walk away with Rs 1000 crore, which is the estimated value of each of these circles? In the end, Koshika will pay the DoT a meagre Rs 150 crore as licence fee per circle, and keep the rest of the Rs 850 crore. We will not allow that to happen. We will cancel the licence and resell these circles."

According to DoT sources, the department has already moved the file to communications minister Ram Vilas Paswan for the cancellation of the Koshika licences. DoT has also returned to Koshika, the Rs 3 crore payment it had made for transition from licence fee to the revenue sharing regime. "The migration happens only after the licence fee dues are cleared. How can we accept money for migration, when the licence fee itself has not been paid," say DoT officials.

Adds a senior DoT official: "Koshika, which has been defaulting on its payments, time and again, has no right to sell these licences. We are not interested in giving any more extensions to Koshika. The licence for UP (East) should also be cancelled and then these circles should be resold."

The company was allowed to continue operating services in UP (East), because Aircell Digilink, the other operator in that circle, had also defaulted on its payment. While Aircell Digilink cleared its dues last month, the last date for the payment of the licence fee dues for Koshika expired on July 24, and it asked the DoT for an extension of two months. Meanwhile, the two UP circles in the reckoning have been valued at $190 million each, as per sources in Koshika Telecom. Currently, according to both DoT and Koshika sources, hectic parleys are on for selling the UP (West) circle to Hutchison, and the UP (East) circle to Escotel. While Hutchison has a presence in UP (East) cellular market through its alliance partner Essar (AirCell Digilink), Escotel runs the cellular service in UP (West).

When contacted, Koshika sources confirmed that the company is close to clinching a deal with Escotel and Hutchison, for the two UP circles. In fact, according to a source, "the deal with Escotel is almost through." However, Koshika officials were confident that the DoT will not cancel the licence: "We have talked to the DoT and since we will make the payment in 15-20 days, as soon as we sell the circles, so there is no reason for the DoT to cancel the licence."

On its part, Escotel, denies it is even talking to Koshika. However, Escotel's executive director and CEO, Manoj Kohli, said that "We are open to buying any circle, which helps us to grow contigously." While Hutchison officials were not available for comment, Kohli said that in case the DoT cancels Koshika's licence to operate services in UP (East), "We will respect the Government's decision." It is a bilateral decision between the Government and Koshika, he added.

Meanwhile, in case this deal comes through, it will help both Hutchison and Escotel, in their eventual game plan of establishing a contiguous presence. As of now, Escotel runs the cellular service in Haryana, Kerala, and UP (East). Hutchison runs the cellular service in Mumbai, and its parent company, Hutchison Whampoa has acquired the Delhi circle from Essar. It is also picking up 49 per cent stake in Usha Martin, Calcutta and Fascel, Gujarat.