Govt unveils compensation package for telecom firms | business | Hindustan Times
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Govt unveils compensation package for telecom firms

Govt has offered a 2% revenue cut for all players and an additional 2% cut for cellular operators.

business Updated: Dec 27, 2003 11:12 IST

Government on Wednesday announced fresh concessions for telecom players at a cost of Rs 968 crore while singling out cellular operators for additional benefits in view of the heavy licence fee paid by them.

Offering a two per cent revenue cut for telecom operators under all categories, government gave an additional two per cent cut in revenue share for cellular operators, who in turn announced withdrawal of their case in the Supreme Court against the WLL services by basic operators.

Announcing the package, Communications Minister Arun Shourie told reporters the government would reduce its revenue share by two per cent across the board for operators in cellular, basic and unified categories and this would cost it Rs 885 crore annually.

In the case of first and second cellular licence holders in a circle, the cut in revenue share would work out to four per cent and the additional benefit to this category would cost the government Rs 83 crore annually.

Besides, the government would soon increase the ceiling of foreign investment in the telecom sector to 74 per cent from 49 per cent now, Shourie said.

The increase in foreign investment, seen beneficial particularly to the cellular operators, would be by allowing additional investment from foreign institutional investors (FII) while Foreign Direct Investment would be capped at 49 per cent.

Shourie said the Finance Ministry would approach the Cabinet for approval to hike the investment limit to 74 per cent from 49 per cent now on the basis of recommendations by the Department of Telecom.

The package comes a day after the cellular operators decided to withdraw their case in the Supreme Court, ending the months-long wrangling between the two segments of service providers.

The cellular players were seeking level playing field and their decision to withdraw the case is believed to have followed their talks with the government for compensation for the high amount of licence fee paid by them in comparision to basic service providers who were also allowed to provide limited mobile services (WLL).

Shourie said the Finance Ministry would also assist cellular operators under financial pressure in negotiating with term lending institutions to help them overcome their heavy debt problem. Cellular operators had been writing to the government about their financial problems saying heavy licence fee and changes in the tariff had caused estimated Rs 7,000 crore loss (accumulated) and that the sector desparately needed some solution to overcome the situation.