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New telcos face penalty for delay

business Updated: Mar 22, 2009 21:27 IST
Manoj Gairola
Manoj Gairola
Hindustan Times
Highlight Story

The global economic meltdown has taken a toll on new telecom operators. All four new licencees of GSM mobile services — Datacom, Swan, Unitech and Essar-owned Local Loop — face penalties for not launching services within the stipulated 12-month time-frame.

The total penalty amounts to about Rs 450 crore.

If they want to escape penalty, the operators would have to launch their services by July. However, none of them has even placed an order for infrastructure equipment, and most do not have an organisation in place.

“They will have to pay the penalty if they do not launch services within stipulated time,” said Siddharth Behura, secretary of the department of telecommunications (DoT). “There is no question of considering any concession due to global
meltdown. Licence is a legal document. We cannot tamper with it.”

The new operators were issued licences in January, 2008. They were supposed to launch services by January, 2009. Later, the government relaxed this condition and the countdown began from the date of issue of spectrum — July 2008.

“We rationalised the licence conditions,” Behura said. “They were supposed to pay liquidated charges from the date of issue of licence. Now they will pay them from the date of issue of spectrum.”

Operationally, it doesn’t appear that the companies would be able to launch services by July. “Even if the new operators place orders today, it will take minimum 10 months to set up network and start services,” said Ravi Sharma, CEO, Phi
Televentures. “Therefore, the earliest the services can be launched is January, 2010.”

This assumes that new vendors have their organisations in place. However, this is far from reality. Swan managed to bring in its foreign partner, Etisalat, about six months ago. Unitech only recently managed a deal with Telenor.

The telecom industry requires huge investments. “A new operator will have to invest about $2 billion every year in India for first five years,” said Sandip Das, CEO of Malaysia based Maxis, which owns a controlling stake in Aircel.