The department of telecommunications (DoT) is likely to allow cellular companies that are operating in non-metro circles and have not paid the third years installment of licence fees, a case-by-case extension to do so. An already-extended deadline for payment of the third tranche expires today.
Only four companies paid the third years licence fees by the earlier deadline set for December 13, 1997. The other 12 cellular licensees accounting for 24 cellular networks in the country were given an extension on the payment following requests by the companies who cited poor cash flows. The cellular companies have been incurring more losses than they had initially projected.
Two companies Birla-AT&T (the cellular licensee in Gujarat and Mahrashtra) and Escotel Cellular (Haryana, Uttar Pradesh (West) and Kerala) paid the third tranches of their licence fees on December 13 last. Two other companies Tata Communications, which holds the licence in Andhra Pradesh, and Reliance Cellular (Bihar, Himachal Pradesh, Madhya Pradesh, North-East, Assam, Orissa, West Bengal) paid the fee later.
More From This Section
Sources, however, clarified that the extension of the deadline for payment of licence fees would invoke the financial penalty clause in the licence agreement. Under the clause, companies not paying the licence fee are mandated to pay an interest penalty of five per cent over the lending rate of the State Bank of India on the licence fee amount due to the government. The terms of the current extension expiring today specify that cellular companies pay the interest penalty, which is compounded monthly.
Already DoT has been giving extensions to cellular companies for the payment of the second years licence fees on a case-by-case basis. JT Mobiles the cellular licensee in Punjab and Karnataka was the first to be given an one-year extension by DoT early last year. The department also deferred payment of the second years licence fees by Fascel Ltd, the Gujarat cellular telecom licensee.
Cellular companies have been claiming that they are incurring more than the budgeted cash losses in the past two years of operation. This is because of two reasons: one, the operators subscriber base has not grown as much as that projected and, two, the existing subscribers have a low airtime usage pattern which results in low revenues per subscriber. Both combined, the cash flows of the companies have been under strain.
Barring three companies Escotel Cellular, Birla-AT&T and Tata Communications which have gone into financial closure, others have been paying licence fees from equity. Several Indian promoters are finding it difficult to do this since equity requirements vary between a minimum of $50 million (Rs 195 crore) to some $120 million (Rs 460 crore). Cellular companies have been asking for a two-year moratorium on payment of licence fees so as to ease cash flows in the initial years of the project.
Also, the companies stress that they have not been given interconnection links between their and DoTs fixed-line networks months after making requests for it, besides facing delays in frequency clearances from the wireless planning and coordination wing of DoT. These delays have pushed forward the date of commissioning of services, thereby upsetting the cellular companies revenues. Consequently, they have claimed that they are unable to pay the licence fees.
The case-by-case extension is likely to exert further pressure on the fiscal deficit targeted at Rs 65,454 crore, 4.5 per cent of GDP. Cellular companies have committed themselves to paying about Rs 1,935 crore a year in licence fees alone. The companies are to pay the annual licence fees in quarterly installments the first an immediate payment and the remaining installments in post-dated cheques. Under this formula, the consolidated funds of the Union government (into which the licence fees are remitted) was to have received Rs 483.75 crore this fiscal year.