The DoT is likely to extend the licence periods of cellular telecom companies from 10 years to 15. The decision, which is expected to be formally announced after the general elections, has been prompted after discussions with the Industrial Credit and Investment Corporation of India Ltd (ICICI).
In a presentation before a meeting on funding infrastructure chaired by cabinet secretary T S R Subramanian earlier this month, ICICI officials had said that the extension of the licence period was imperative to help lenders recover their loans. Typically, loans to telecom projects are of a seven-year maturity, which leaves only three years repayment period.
Three years is too little a comfort period. We will find it hard to reschedule the loan (repayment), if the need arises, an executive in the project finance division of a bank said. An extension of the licence period, he said, would reduce the risks of lending to telecom projects considerably.
The cellular licences in the circles (mostly analogous to states) have a debt requirement of almost Rs 9,000 crore. The project cost of 14 cellular operators is expected to be more than Rs 14,700 crore. Of these, three projects Escotel Cellular, Birla AT&T and Tata Communications have gone into financial closure.
However, sources said the department has still not finalised the licence fees to be paid in the five-year extension period. One view is that the companies may be allowed the extension without any extra licence fees. ICICI has not made any suggestions on the issue of licence fees.
The extension of the cellular telecom licence period will have a positive impact on basic telecom companies.
The latter has not formally asked DoT for an extension of the period from 15 years to 20, but expects to get an extension if the cellular industry does.
A formal decision on the extension, however, is not expected to be announced before the general elections in March. Telecom secretary A V Gokak said earlier this month that DoT was studying the cellular industrys proposal and would wait for inputs from financial institutions and the Bureau of Industrial Costs and Prices (BICP), which has been asked to look into the costs of cellular companies.
Said a senior DoT official: The ICICI recommendation has been taken note of. However, this is a matter that will require discussion with other ministries also. The decision is, however, likely to be speeded up given the governments enthusiasm in getting infrastructure projects off the ground.
Earlier this month, FIs, the government and the Reserve Bank of India had agreed to a time-bound action plan to achieve early financial closure of pending infrastructure projects. It was decided to hold continous meetings every three months to iron out procedural and administrative problems to achieve financial closure for viable projects.
It was noted at the meeting that while the progress in telecom was satisfactory, issues relating to basic services such as finalisation of a comprehensive interconnection agreement and a tripartite agreement for assignment of license were yet to be resolved.
