It is official now. Telecom minister A Raja confirmed on Tuesday that the Telecom Commission, the apex policy making body of the department of telecommunications, would discuss bailout options for new telecom operators who got licences in January, 2008.
FE was the first to report in its edition dated August 30 that the government has started working towards providing an exit route to the new telecom operators who are finding tough to roll out services faced with problems of raising funds in the absence of a viable business model in a crowded market with 14 operators.
“In the last operators’ meeting, it was highlighted…bailout may be done. It will be discussed in the telecom commission,” Raja said on the sidelines of an industry conference. The new telecom operators have a dismal record so far in terms of rolling out services and garnering subscribers ? the eight new entrants account for less than 3% of the country?s over 600 million subscribers. However, tough merger and acquisitions guidelines have made it difficult for them to cash out. To prohibit the new entrants from making unearned gains the government had put in a three-year lock-in period within which the promoters’ have been barred from selling their equity.
As earlier reported by FE, the options around which the government is working are either to ask the failed operators to refund the spectrum to the government and get a refund of some amount of licence fee; or come out with liberal M&A norms, which allows them to sell-off to others. The government stands to gain more in the latter case as it would then levy a transaction charge being the ultimate owner of spectrum. Since the new operators have neither subscriber nor network the only thing in which any incumbent or foreign player would be interested is spectrum. For a pan-India licence these operators have paid Rs 1,651 crore.
Out of eight applicants who received telecom licences in January, 2008, only two have rolled out services, that too only in some of the circles for which they received the licence. As of January, 2010, only two operators?Unitech Wireless and S Tel ?had launched operations. Telenor of Norway has a 67.25% stake in Unitech Wireless, which has launched services in 8 out of 22 circles, while S Tel has launched services in three out of six circles.
This is when the new licensees are required to cover at least 10% of the district headquarters by the end of the first year of being given the licences and 50% by the third year. According to the licence conditions the government can levy fine on them for delay in roll out and after that can scrap their licences.