The two basic telecom circles of Bihar and Karnataka have fallen vacant with the Department of Telecommunications (DoT) encashing the bank guarantees of Hughes Ispat and Usha Telecom, respectively, for allegedly not fulfiling the required conditions for procuring the licence.
According to DoT officials, a notice revoking the letter of intent (LoI) issued for the Bihar circle was sent to Usha Telecom last week and its earnest cash deposit of Rs 5 crore impounded. Hughes Ispat's bank guarantee for the Karnataka circle, worth Rs 50 crore, has also been invoked.
"The LoI to Hughes Ispat is deemed cancelled as their bank guarantee has been invoked by us, and a formal letter from us in this regard will follow very soon," a senior DoT official told Business Standard. "This would obviously imply that these two basic services circles have fallen vacant," he added.
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Expressing surprise over DoT's haste in taking this decision even as negotiations were going on, Usha Telecom director V C Rai told Business Standard that although he had heard about DoT revoking the LoI for Bihar, he had not yet seen the formal letter as he was out of town.
Ispat Industries vice-president K N Paradkar declined to comment on the issue, saying he was not authorised to speak on matters pertaining to Hughes Ispat. Other senior company officials could not be contacted.
"We were, and still are, very keen to take up the basic services licence for Bihar as our group company Koshika already has the cellular licence for the state," V C Rai said. "We had already paid up the first year's licence fees worth Rs 9 crore, besides furnishing Rs 15 crore out of the Rs 25 crore required as performance bank guarantee."
According to Rai, the main problem was furnishing the Rs 9 crore financial bank guarantee required by DoT. "We have been willing to pay these outstandings anytime," he said. "The only bone of contention was that DoT wanted a guarantee from a scheduled bank, and not from an insurance company as offered by us. Also, we had asked them to clarify whether we would be able to take the licence under the new revenue sharing arrangement as per the New Telecom Policy, and were only awaiting their answer."
DoT has earlier encashed the bank guarantees of companies which did not pick up the licences for basic circles as in the case of HFCL (Delhi, Haryana, Uttar Pradesh (West), and Orissa) and RPG (Tamil Nadu). All these cases are still in the court.