The department of telecommunications (DoT) has forwarded a bizarre reasoning for refunding R8,313.81 crore and R4,533.97 crore to state-owned telecom firms BSNL and MTNL, respectively, in lieu of the companies surrendering their broadband wireless access spectrum (BWA).
Aware that the notice inviting applications (NIA) for auction of 3G and BWA spectrum in February 2010 did not provide for refund of any money in case spectrum was either returned, revoked or withdrawn, the DoT has said that the two were not intimated about the NIA conditions through their allotment letter, so the conditions do not apply to them.
In a recent note to the group of ministers constituted for providing financial support to the two PSUs, the DoT has said, ?Neither MTNL nor BSNL were participants in the auction. When spectrum was allotted to BSNL and MTNL initially, the allotment letter did not indicate that NIA condition regarding surrender of spectrum in the allotment letters?.therefore clause 3.7 of the NIA stating that no refund would be provided in case of spectrum should not be extended to BSNL and MTNL?.
Anticipating that private operators would protest any move to refund them the money, the note had stated: ?The request of BSNL and MTNL for surrender with full refund does not, therefore, impact the conditions for other private operators who obtained spectrum through the auction process in 2010, in a different band and to whom the conditions of the NIA clearly applied?.
MTNL and BSNL were provided BWA spectrum in the 2.5-Ghz band in 2008 on the condition that they would pay the highest bid price whenever auction takes place. Post auctions in 2010, the private operators were provided BWA spectrum in the 2.3-Ghz band. The DoT?s reasoning comes after an earlier request in 2010 by the then telecom minister to reimburse the amount paid by the two firms towards 3G and BWA spectrum was rejected by the finance ministry on the grounds that the NIA does not provide for any such measure.
The legal advisor in the DoT has also said that the NIA conditions do not provide for refund, therefore, any such requests by the two PSUs be handled administratively. Whether the two get a refund or not would now be deliberated in the GoM based on the comments received by other relevant ministries who are part of the inter-ministerial consultations. Private operators have opposed any such refund to the two state-owned firms as it is against the rules as well as norms of a level playing field.
BSNL was provided BWA spectrum in all the 20 circles it operates in for R8,313.81 crore, while, for MTNL, which operates only in Mumbai and Delhi, it was given for R4,533.97 crore. While BSNL has surrendered spectrum in six circles entailing a refund of R6,724.51 crore, MTNL wants to surrender in both the circles and get the full refund.
The note has cited that the two PSUs had, at various stages, protested against the payments (not allotment of spectrum) when the demand was raised post auctions in 2010.
BSNL has even said that it required the BWA spectrum to provide connectivity to the common service centres (CSCs) it was setting up in 2007 on the recommendations of the information technology department. Both have accepted that they failed in utilising the BWA spectrum commercially. The DoT?s note, while highlighting the grim financial position of the two PSUs, has urged for financial support (read bailout) to them since it feels that they are of strategic and national importance and checks cartelisation by the private operators. ?
In FY13, BSNL has indicated that it will make losses of around R8,198 crore, while MTNL recorded losses of R3,335 crore during the quarter ended December 31, 2012. Further, MTNL?s net worth is likely to get eroded during the current quarter. Both have been making losses for the last three years.
While blaming various legacy issues for their failure, the DoT has mainly blamed the high employee cost the two firms have to bear. In case of MTNL, the employee cost as a percentage of revenue is over 103%, while, for BSNL, it is at 49% against the industry average of less than 5%.