The five basic telecom companies holding letters of intent for operating services in six circles are unlikely to sign the licence and interconnect agreements by September 30, the deadline set by the department of telecommunications (DoT).
The companies have scheduled a meeting of their top executives in Delhi on September 26 is to discuss some outstanding issues, which have still not been resolved despite all the meetings and revisions. Sources said they were not sure whether a recommendation on the issues would be made to DoT after the meeting.
The companies reluctance to ink the dotted line by the end of this month is likely to push forward the already-delayed deregulation of basic telecom services in the country. The move could either lead to DoT scrapping the companies LoIs or result in imposing penalties on the licence fees.
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Two of the LoI holders the RPG-led Basic Teleservices which holds the LoI in Tamil Nadu and Usha groups Techno Telecom (Bihar) have not even received copies of the licence and interconnect agreements yet because they have cases against DoT pending in the Delhi high court.
The two companies along with Essar Commvision (Punjab) had challenged a DoT move to encash their bid guarantees after they failed to produce bank guarantees for their licence fees and performance committments. The Essar company later entered into an out-of-court settlement with DoT, which enabled them to receive the licence and interconnect pacts.
Besides Basic Teleservices, Techno Telecom and Essar Commvision, the companies are Tata Teleservices (AP) and Hughes Ispat (Maharashtra and Karnataka). Sources at the Essar company said here yesterday that they were working towards signing the agreements, but were not sure whether they would be able to do so before September 30.
A top executive of Essar Commvision said that his company had not received a copy of the tripartite agreement between itself, DoT and financial institutions. Otherwise, we are almost ready to sign the agreements. We are working hard towards that deadline, he said. The Essar company has committed licence fees of some Rs 4,593 crore for the right to provide basic services in Punjab.
Tata Teleservices sources also confirmed that the company will be unable to sign the pacts. A senior executive told the Business Standard that the company was in the final stages of tying up finances for its Andhra Pradesh project, which has a licence fee tag of Rs 4,200 crore. The process is expected to take two-three weeks more.
Hughes Ispat, which has committed over Rs 18,000 crore in licence fees for Maharashtra and Karnataka, is also unlikely to sign the licences.
A revokal of the companies LoIs is unlikely given the huge revenues that the government stands to gain over Rs 41,000 crore in licence fees (especially in a poor tax buoyancy year) over 15 years. The companies are aware of this and are risking paying penalties (some 20 per cent annually) on their first years licence fee tranche.