Coming to the rescue of new telecom licensees like Unitech Wireless, Datacom, Loop Telecom and Swan Telecom, the government has postponed and staggered the penalties liable for failing to meet year-one rollout obligations. The relief is a result of an amendment by the department of telecommunications in the licence condition so that the meter starts running on rollout obligations from the spectrum allocation date rather than licence allotment date.
Since these companies were granted licences for all their circles on January 27, 2008, but were granted staggered spectrum a few months later, not only has the date on which the penalty is due been postponed, but the amount has also been slashed. Collectively, the four licensees would have had to pay over Rs 51 crore in penalties by April 27 (factoring in a 13-week grace period). Now, they will be liable to fork out only Rs 2.6 crore by July 22.
That comes as a big bailout as none of the new licensees have even achieved financial closure. Unitech Wireless, an arm of real estate firm Unitech Ltd that has licences for 22 circles, is yet to see funds from Norwegian company Telenor, which has decided to pick up a 60% stake. Parent company Unitech is facing a serious cash crunch as the real estate sector has crumpled in the economic downturn. It recently sold a hotel in Delhi for Rs 230 crore to raise funds.
The current amendment, however, makes it more complicated for DoT to penalise erring new entrants because of the staggered nature of spectrum allotment resulting in multiple penalty dates. By now, operators were supposed to have already rolled out services in at least 10% of the various district headquarters.
DoT has a complicated and progressively punitive penalty structure. It can imposed a fine of Rs 5 lakh per circle every week for the first 13 weeks of delay, Rs 10 lakh for the next 13 weeks and thereafter Rs 20 lakh for delays of up to 26 weeks. If an operator fails to fulfil its rollout obligation even after 52 weeks, DoT can cancel its licence.
Theoretically, Unitech, for instance, would have attracted a total penalty of Rs 2,090 crore if it should fail to meet its first-year rollout obligations by the end of year two. Datacom and Loop Telecom also have licences for 22 circles, while Swan has 13 circles. If all four have nothing to show for their licences after two years, the exchequer would have been richer by Rs 7,500 crore.
DoT?s relaxation assumes significance since in the past, it had reiterated?as in the case of Idea Cellular?that the date of granting licence would be counted as the effective date for calculating rollout obligations. In the event of companies not receiving spectrum on time, they were told to start with wireline services to meet the conditionality.
Earlier, DoT had attempted to relax norms for these firms by doing away with the year-one obligation and retaining the year-three requirement of 50% district coverage instead.
