TRAI proposal to reduce ad time upsets TV channels

The Telecom Regulatory Authority of India has proposed to regulate the duration, frequency, timing and audio levels of advertisements. TRAI, in its paper, says that free-to-air channels should not carry ads exceeding 12 minutes per hour (inclusive of 10 minutes of commercials and two minutes of self promotions) and pay channels not over six minutes of ads an hour. TRAI also says that for live telecast of sporting events, ads should only be carried during actual breaks. These rules already exist but are often breached, reports said. The regulator says that ads should not in any manner interfere with the programme use of lower part of screen to carry captions, static or moving alongside the programme. However, pay channels are unhappy with the TRAIs proposal as they feel that their primary source of revenue would take a hit. Advertising contributes about 60% to the revenues of paid channels. Also, due to leakages in the broadcasting system, pay channels depend more on advertising than subscription revenues, reports said. "TRAI has no business to meddle with the duration of ads. The objective of each channel is to make profits and it should work on the principles of free market," reports said quoting Paritosh Joshi, CEO, Star CJ and Director, Indian Broadcasting Federation. If and when the proposal is accepted, it remains to be seen if TV channels would hike their rates to make up for the dip in revenues.

Allow customers to pick and choose channels: TRAI

The Telecom Regulatory Authority of India (TRAI) issued its tariff order for 2010, for digital addressable systems such as DTH and IPTV and insisted that customers must be given free choice of pay channels. DTH and IPTV providers will have to allow consumers to choose and pay for only those channels they want to watch, besides a minimum monthly fee of Rs150. The regulator restrained itself from fixing tariffs for individual channels, although it reduced the maximum amount broadcasters can charge DTH, IPTV and digital cable providers for channels. The change must be made by September and the final deadline will be January 2011 if operators needed extra time for technical upgrade.

No fresh telecom license norms for new applicants

The Department of Telecom is understood to have dropped the initial idea of framing fresh guidelines for the 575 new licence applications but will verify ownership, shareholding pattern and source of funding of these aspirants.
There would not be fresh guidelines for these hopefuls on any criteria including lock-in period, raising net worth and the like, official sources said, adding the existing norms in these aspects would be applicable to them.
If the policy is changed for new players, then existing players would have to be asked to apply again so that nobody feels that there is a non-level playing field. But this does not mean that company details, shareholding pattern, hidden information and funding sources would not be verified, the sources said.
However, sources said this cannot be music to new applicants as DoT was in no hurry to issue Letters of Intent as there is hardly an spectrum to give it to new, existing or cross-over players who are planning to offer both GSM/CDMA technology based mobile services.
Allocation of spectrum is subject to availability and this is written well in the current guidelines, sources said.
Telecom Minister A Raja had earlier said DoT would work out fresh guidelines for new applicants as considering the huge number of applications, there was a need to form new norms. However, after receiving applications, he had later said that norms could not be changed as it would put them to disadvantageous position.
The new applicants include a host of real estate players such as DLF, Unitech and Parsvnath Developers, besides foreign firms such as AT&T.

DoT makes it tougher for cos to get spectrum

Minimum subscriber criterion enhanced. The department of telecom (DoT) today announced a set of rules for granting telecom licences and allocating spectrum that is likely to impact GSM-technology service providers like Bharti Airtel and Vodafone Essar, among others. DoT’s new policy accepts the recommendations of the Telecom Regulatory Authority of India (Trai) on enhancing the minimum number of subscribers required by existing operators to qualify for additional spectrum. However, the final norms in this regard will be decided by DoT after it receives a report from the Telecom Engineering Centre. This implies that GSM operators will now have to first increase their user base to qualify for additional spectrum, a process that would take a few years and delay expansion plans. The policy has also delinked the unified access service licence (UASL) from spectrum allocation, which effectively raises the bar on this front. Several service providers have been waiting since January 2006 and 46 companies had applied for licences on the assumption that they would automatically be granted spectrum if their applications were approved. Crucially, DoT has also upheld the policy that mobile licences are technology-neutral – implying that any operator can use either GSM or CDMA equipment to run networks. This move mainly benefits Reliance Communications, which was granted the dual-use right late on Thursday night. The company today paid the mandatory Rs 1,650-odd crore and joined the queue of operators seeking spectrum. In addition, DoT said that state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd could also use alternative technology to run mobile services (both operators mainly use GSM). However, unlike the private operators, these two companies will not have to pay the entry (or licence) fee for the switch-over. The department also said it would issue guidelines on mergers and acquisition later. However, it will not hike the minimum threshold equity level of 10 per cent to the 20 per cent, recommended by Trai.

WIRED UP

Spectrum delinked from licence; all eligible applicants to be granted LoI and asked to pay entry fee. No guarantee they will get mobile spectrum Telecom Engineering Centre to finalise enhanced user base criteria Excess spectrum to be surrendered, especially where user base is lower than required New merger and acquisition norms to be issued later, to be different from Trai view

Telecom — Making sense of the licence rush

300! That isn’t the name of the recently released English movie. It’s the number of new applicants for the UASL (Unified Access Services Licence) telecom licence.

The driving force behind this deluge of applications is the desire to participate in the fastest growing telecom market in the world — India — which is seeing over 7 million mobile telephone subscribers being added every month. Before we categorise and analyse the prospects of the applicants, it must be highlighted that any new player would have to contend with the following:

Although the UAS licence allows provision of the entire gamut of wireless and wireline voice and data services, this rush for licences could be purely by players interested in tapping the mobile telephony market.

For a player who bags the licence, a countrywide (23 service area/circle) UASL entry fee may cost at least Rs 1,400 crore — licences are usually issued through the auction route. In addition, there is an annual fee of 6-10 per cent linked to revenues, as well as spectrum charges of 2-6 per cent of revenues.

Spectrum, the band of airwaves used for communication that is licensed, is scarce and its allocation to operators is based on subscriber numbers and satisfaction of the Department of Telecom’s (DoT’s) stiff service area rollout obligations.

A current countrywide rollout of fresh network is estimated to entail investments of about $1 billion for a normal 2G network. If it is to be an Internet Protocol-based NextGen Network or any advanced technology rollout (EDGE, WCDMA, EVDO, HSDPA or TD-SCDMA), it could be much more. There could be a two-three year timeline involved in a nationwide rollout.

Given the substantial investments as well as staying power involved in a successful telecom foray, we evaluate which among the recent crop of applicants is likely to enjoy success.

Real-estate, telecom synergies?

Real-estate companies have been the most prominent set of applicants in this particular phase, with DLF, Unitech, and Parsvnath among the key players in the fray. There is speculation that some of these players may be in talks with overseas telecom companies for a joint foray into Indian markets, but nothing is confirmed as yet.

Real-estate players, although they have no previous expertise in running a telecom business, have a few factors favouring them. Most of them have huge land banks to build townships. This could be used to house a part of their tower infrastructure, thus reducing rental costs, a key part of operational expenditure involved in telecom operations.

In this context, players such as DLF, Omaxe and Parsvnath are flush with cash after their successful IPOs as well as other fund-raising over the past couple of years. This might allow them to operate at low or even negative profitability for the first few years of operation, which is inevitable.

But with most of the leading real-estate players having significant land banks in the metros or major cities, the land holdings may not offer any edge to these players in telecom rollouts in rural areas or even tier 2 towns. DLF and Parsvnath have some land banks in these areas and may be able to put part of them for productive telecom usage.

While these players have staying power, a tie-up of such companies with a domestic or international telecom operator could bring in the business expertise required for telecom operations. In that event, the time for the combined entity to roll out operations could also be reduced.

Existing players on firm ground

A good number of existing players from telecom and related businesses, such as Idea Cellular, Spice Communications, Reliance (ADAG), Maxis-Aircel, Tulip IT Services, BPL and Hinduja TMT are also among the prospective applicants. The first four companies have existing operations on a regional/national scale and their applications are directed towards having a wider footprint across India.

Each of these applicants is approaching its foray with a different strategic intent. Idea Cellular, which has operations in 11 service areas, applied for licence to commence operations in Mumbai and Bihar nearly a year ago and is awaiting spectrum allocation. As the company is a leader in the Maharashtra market, this move appears synergistic.

Reliance Communications’ application appears to be a move to expand its GSM footprint. The telecom regulator TRAI (Telecom and Regulatory Authority of India) has, incidentally, allowed a single operator to offer both technologies (CDMA and GSM) within a circle.

Spice Communications has ambitious plans of becoming a national player from the 2-circle player that it currently is. Aircel, which has operations in Chennai, Tamil Nadu and the North-East (under the name Dishnet Wireless), has also applied for licences to create a more pan-India footprint.

The above applicants appear to stand a better chance of obtaining licences in new areas, given their existing operations.

There are indications that applications would be considered as per existing guidelines on a first-come-first-served basis, which suggests preference to these players, on a case-to-case basis. However, even if some of the new applicants manage to secure licences, spectrum allocation remains an issue.

Even on this score, the existing players appear better placed than the rest. A separate committee has been set up to look at licensing and spectrum allocation norms for new entrants into the telecom space. Given the current spectrum crunch, new players may also have to contend with very stringent norms for rollout as well as usage norms for spectrum.

Tulip IT, which is a countrywide provider of data connectivity, has applied for licences in six circles. With its VPN and network integration expertise, Tulip has the expertise to enter the fray as a service provider. But, as mentioned earlier, this would mean huge capital expenditure and low margins in the first few years of operation.

Pact with global players

Mahindra & Mahindra appears to be the only applicant in this category that has confirmed interest. The company plans an alliance with AT&T for this foray. Tech Mahindra, a telecom software company in which M&M holds a 44.4 per cent stake, has substantial experience in working with telecom service providers as well as equipment vendors and has a strong relationship with AT&T.

This trio appears to be a strong contender to offer significant competition to the entrenched players. An alliance with AT&T brings with it the latter’s expertise from running a highly successful telecom business in the US as well as its earlier experience partnering Idea Cellular in India; both appear to be huge pluses.

Alternative routes to a telecom foray

All the prospective applicants, however, need not take the traditional route to rolling out telecom services. Here are a few alternative avenues that they can explore:

MVNO (mobile virtual network operator): These kinds of operators do not own any spectrum or network infrastructure but buy it from existing operators and act merely as resellers. MVNOs usually have a strong brand image in one line of business and look to leverage on that in another business. Virgin Mobile, Disney Mobile and Tesco Mobile are a few successful examples.

This might work especially well for leading real-estate players such as DLF and Unitech, which have high visibility for their brands and may use this for providing connectivity to their townships. However, this concept is yet to evolve in India and the telecom regulator has asked operators for their opinion on this and is looking at evolving guidelines for the same.

Inorganic growth: The option of acquiring a presence through inorganic growth or acquisition of regional players is a route that is open to all applicants. There are a few regional and relatively small players, such as Shyam Telecom, HFCL Infotel, and Spice Communications, which may not be growing at a rapid pace. These companies (if they are open to stake sale) may offer new players an entry point into the market through the M&A route. Such acquisitions may offer a prospective entrant a readymade subscriber base and spectrum to work with.

Bidding for 3G alone?: A comprehensive policy on 3G services is still awaited from the telecom regulator/DoT. 3G services, at the most basic level enable provision of feature-rich voice, data and video services with a much faster throughput.

In this regard, new players may win licences and choose to focus only on high-end 3G services, if there is an auction for 3G spectrum, and new players are allowed to bid. These are high revenue earning services, though predicting the market for such services in the Indian context is a challenging task.

TRAI recommendations to be examined by Telecom Commissions

The Telecom Commission, the policy-making wing of the Department of Telecom, met on Friday to discuss regulator TRAI's recommendations on licensing reforms including pricing for the additional mobile (2G) spectrum.

Official sources said the Commission examined all the proposals and the draft policy made by the DoT's internal committee. There was consensus among the Commission members on the decisions of the draft prepared by the internal committee. The Commission will again meet on Monday to have further discussions on the same.

The Telecom Commission's decision is not final unless approved by the Communications and IT Minister, they said.

Although no confirmation was available on the exact proposals of the internal committee, sources said on capping of the number of players, the decision is to go by TRAI recommendations of having unlimited number of operators.

But on the crucial 2G additional spectrum allocation pricing, there were various point of views -- raising the revenue share for each additional MHz of spectrum, enhancing the number of subscribers for giving additional spectrum and the entry fee to give spectrum over 10 MHz and 5 MHz for GSM and CDMA operators.

Operators currently pay certain percentage of their revenue as additional spectrum charges. The current policy for giving additional spectrum is subscriber-linked.

Other recommendations by TRAI include on merger and acquisitions where the subscriber base of the combined entity is to be reduced to 40% of the given market from the current 67%, allowing dual GSM and CDMA technology and a licensee being allowed to hold up to 20% in another telecom company in the same circle.

305 applications

The Department of Telecommunications (DoT) has received a total of 305 applications from 21 companies during the last week of submission for approval. In the previous week, DoT received around 100 applications, taking the total number of requests for telecom licences to 401.

The DoT had fixed October 1 as the last date for accepting applications.

Among the companies that have applied for pan-India licences include Bycell Communications, Next Generation, Avnija Properties, AT&T, Sterlite Infrastructure (Sterlite Group), Videocon Group, Silicon Infosys, Satvik High-Tech Builders and Cellebrum Communications among others.

These companies were seeking to commence operations from all the 22 circles in the country, sources in the telecom ministry said.

While companies such as ECME Telepower applied for 12 circles, Meta Telecom (7 circles) and Spurt Industry (6 circles), some players opted for single circle operations.

The companies opting for single circle operations include Electro Therm India (Gujarat) and RSK Enterprise (Jammu & Kashmir).

The major companies such as BPL Mobile (22 circles), HFCL (21), Datacomp (22), Spice Communications (20) and the Anil Ambani group companies Swan Telecom (14) and Cheetah (2), and Parsvnath (22) had applied for licences during the prior week.

The telecom ministry is expected to begin scrutiny of the applications in the next couple of weeks. Sources also said the ministry has received assurances from the Ministry of Defence for vacation of spectrum by the end of this year.

The DoT, which is also the licensor of telecom services in the country, had sought release of 45 MHz spectrum from defence establishments. Even though, this is unlikely, some spectrum would be released during the next two-three month period.

Govt cheats Private Telcos, allots spectrum to BSNL

DoT allotted BSNL spectrum between March and July.

Tensions between private telecom players and the government ratcheted up a notch after it was discovered that state-owned Bharat Sanchar Nigam Ltd (BSNL) was given additional spectrum of up to 10 MHz for GSM technology services in over 16 circles even as private competitors have been waiting to be allotted spectrum by the Department of Telecommunications (DoT) since December 2006.

GSM operators say this is a clear violation of government assurances of a “level playing field” between private and state-owned operators on the question of allocation of spectrum, the radio frequencies that enable wireless communication.

The issue came to light a few days ago when BSNL issued a circular to its chief general managers in various circles saying the management had decided to use the additional spectrum commercially with immediate effect.

DoT granted the company additional spectrum between March and July this year.

The allocation covers circles which include Andhra Pradesh, Bihar, Assam, Chennai, Haryana, Kolkata, Karnataka, Kerala, Maharashtra, Tamil Nadu, eastern and western Uttar Pradesh amongst others.

In most of these circles, spectrum has been granted in the range of 2 to 3.8 MHz.

The issue was brought to the notice of Communications Minister A Raja by the GSM operators’ lobby, Cellular Operators Association of India (COAI), at a ministerial meet here yesterday.

Confirming the additional allocation, a top BSNL executive said: “There is nothing wrong in this; we have been given spectrum according to the guidelines.”

GSM operators, however, complain that many of them are yet to hear from DoT on their nine-month-old applications.

Companies like Aircel, Vodafone-Essar and Idea Cellular were collectively granted 22 universal access service licences (UASLs), which allows them to offer both GSM and CDMA technology services, in December 2006.

The spectrum issue has become even more serious with DoT having received over 300 applications for UASLs.

With players ranging from real estate (Omaxe, Unitech, Parsvnath), steel major like Ispat Industries and little-known IT companies in the race, much hinges on the defence ministry vacating 25 MHz of spectrum.

Consider only us - Cellular Operators Association of India

Cellular Operators Association of India (COAI) — the lobby for service providers using GSM technology — has demanded that all spectrum allocation for new circles and existing one should be made transparently on a first-come first-serve basis based on the date of application.

In its 30-slide presentation to Communications Minister A Raja, GSM operators have also demanded that incumbent GSM operators, whose licence applications are pending since December 2006, must be placed on a “different footing from other applicants and accorded top priority for issue if license and initial spectrum”.

The move will benefit telecom operators like Spice Telecom (which has applied for a licence in 20 circles) and Idea Cellular (which has applied for licences in nine circles) since December 2006 . It will also benefit Aircel, Vodafone Essar and Bharti Airtel, which have licences but are waiting for spectrum for over a year or two.

The meeting which was called by Raja to hear out the telecom operators was attended by Sunil Mittal, chairman of Bharti group , Asim Ghosh, CEO of Vodafone-Essar Ltd, Manoj Kohli, president of Bharti Airtel, Spice Telecom promoter B K Modi, Idea Cellular chief Sanjeev Aga and representatives of Reliance, COAI and the Association of United Telecom Service Providers — the CDMA-technology association.

Said T V Ramachandran, director general of COAI, “We have requested the government to differentiate between serious and non-serious telecom players.” Concerned with the deluge of applications for telecom licences — some 30 companies have applied for over 300 licences — the GSM lobby has suggested preference be given to companies with telecom experience and who are ready to accept a five-year lock-in period before they can sell their equity.

It has also recommended that the cross-holding restriction, under which one company cannot take more than 10 per cent in another company in the same service area, should be enforced rigorously.

Strongly attacking the recent deluge of applications, COAI in its presentation pointed out that interest from non-telecom companies appears to be driven only by financial speculation as a result of the flawed recommendations of the Telecom Regulatory Authority of India (Trai), which has created an impression of abundant spectrum availability. GSM operators pointed out that they did not rule out prospect of spectrum grabbing and subsequent sale at profit to foreign telcos.

Bharti peeved by govt's schoolmasterly treatment

Bharti Airtel, India's largest private mobile operator, today expressed concern over the government imposing penalties on "small issues", saying this hampers growth of the sector and spreads fear among investors.

"It is unfair to impose penalties. The Department of Telecom pulls out show cause notices for every small issue. This is hampering the growth of the sector," Bharti Airtel chairman Sunil Mittal said at a meeting of telecom minister A Raja with the operators here today. "It spreads fear among investors."

He cited an example of notices issued by the government to private telecom operators for having mobile telephony signals along the country's borders.

He also asked the minister to rationalise the duties being paid by telecom operators.

Raja held an hour-long meeting with operators and their associations to review the telecom scenario, and sought their suggestions before finalising guidelines and any policy relating to allocation of spectrum or issuing fresh licences.

Mittal also criticised the Telecom Regulatory Authority of India (Trai) over its recent recommendations on spectrum saying there were many technical faults. Trai issued eight corrections last week itself and asked Raja not to accept them without analysing their impact on the sector, he added.

Telecom License lock in periods ?

With the queue for telecom licences getting longer by the day, the department of telecommunications (DoT) is planning to introduce a lock-in period to weed out non-serious applicants. Such a lock-in is likely to apply on two counts — exit lock-in and ownership lock-in.

If implemented, a new applicant who is allocated spectrum to launch cellular services will be able to sell out only after operating for a certain number of years. At the same time, its promoters will not be able to sell their stake beyond a certain percentage during this period, despite the foreign direct investment (FDI) limit being at 74%. A final call on this will be taken by the DoT committee set up to formulate pre-qualification norms for applicants and screening guidelines for those that qualify.

When contacted, a government official close to the developments told ET: "There’s no final view since the matter is yet to be taken up by the Telecom Commission. Talks are at a conceptual stage, wherein an exit lock-in will prevent a new universal access service licence (UASL) applicant from exiting the business for a specified period. An ownership lock-in will be more complex as it will entail a defined set of norms that prevents the promoter group in a new licensee company from offloading its stake."

The official said the ownership lock-in will ensure a minimum equity investment in a company that has applied for a mobile licence for a specific period. "There is no decision yet on such a minimum ownership threshold. The matter will be discussed by the Telecom Commission shortly," he said.

Besides the possible introduction of exit/ownership lock-in periods, the DoT committee set up to put in place new norms to screen applicants is also looking at tightening roll-out obligations, increasing the net worth of companies eligible to apply, and reducing the 90-day deadline for companies to convert their letters of intent (LoI) into licences.

Sources said the options being explored involve raising the net worth to around Rs 2,000 crore from the current Rs 1,300 crore and companies being asked to convert their LoIs into licences within 10 days. Telecom minister A Raja had said recently: "All licences will be scrutinised and limited applications selected."

A global investment banker said "determining a workable ownership lock-in period will be a tough call, since all associated legal and commercial complexities will have to be weighed against the present financing requirements".

With companies making a beeline for cellular licences, DoT has constituted an agency consisting of members from different government departments to establish the actual identities of the promoters and shareholders behind the new applications. "DoT will do its bit to ensure offshore deals in the nature of ‘benami’ transactions do not transpire and there is genuine transparency," said the top government official.

DoT gets 500 applications

The frenzy over telecom licences came to an end on Monday with the tally touching the 500-mark as a number of biggies including AT&T, Hindujas, DLF, Sterlite and Videocon jumped into the fray to tap the world's fastest growing cellular market.

The figure may go beyond 500 as the Department of Telecom (DoT) is still counting the applications received from various companies as the deadline expired today. Nearly 200 applications are estimated to have been submitted today.

A senior DoT official termed the rush of applications as "sheer madness" and the Department would start scrutinising these documents soon. The DoT would screen the applicants once a committee appointed by Communications Minister A Raja comes up with fresh guidelines detailing the minimum net worth, ownership and other crucial aspects of the applicants.

Raja has already said that a select number of applicants would be selected. DoT would be following a two-stage screening process. There are allegations by GSM players' lobby COAI that many applicants are front companies of existing players who are trying to circumvent existing restrictions.

The companies which have sought licence include property developers Parsvnath, Unitech, Indiabulls Real Estate, Omaxe and DLF. Besides, Allianz Infratech, Shyam Telecom, HFCL, BPL, Cheetah, DataCom, Stel, Swan Telecom, Tulip, JSW Steel and Bycell also applied. Ispat Industries, Sify, Moser Baer and Dalmia Group are also believed to have put in applications.

US firm AT&T tied up with diversified group Mahindras and Hinduja Group applied through its subsidiary HTMT Telecom.

Most of the players have sought licences for all the 22 circles in the country. India is the world's fastest growing telecom market and existing players are adding more than eight million subscribers every month.

Mad rush for telecom licenses

US telecom giant AT&T Inc. is all set to begin a new innings in India. This time, AT&T will partner diversified auto major Mahindra & Mahindra Ltd. (M&M). The two have reportedly applied for telecom licenses in all 22 circles.

It may be recalled that in December 2004, AT&T sold its stake in Idea Cellular to Indian partners the Tata Group and Aditya Birla Group.

AT&T filed the application with Department of Telecommunications (DoT), in partnership with Mahindra Telecommunications Pvt. Ltd., a part of the M&M.

"This is an important step toward participating in India's upcoming spectrum allocation proceedings," AT&T said in a statement.

Indian regulations allow Foreign Direct Investment (FDI) of up to 74% in the telecom sector.

Separately, real estate companies DLF and Omaxe, IT solutions firm Tulip IT and cable television provider Hinduja TMT applied for telecom licences on the last date for filing applications.

AT&T and Tulip already have licences to provide National Long Distance (NLD) and International Long Distance (ILD) services in India.

DLF and Omaxe join other real estate firms like Indiabulls Real Estate, Unitech and Parsvnath Developers in applying for telecom licenses. Over the last few weeks, the DoT has received about 250 new applications for new universal access service licences.

Earlier, a newspaper reported that the DoT was planning to introduce a lock-in period to eliminate non-serious players, amid a mad rush among companies to obtain new telecom licenses before the window closes today.

As per the proposed lock-in conditions, a company will be able to sell telecom licenses only after operating for a certain number of years. At the same time, promoters will not be able to reduce their shareholding beyond a certain limit.

Some industry analysts say the scramble for getting new telecom licences is due to telecom regulator TRAI's latest recommendation that the number of players in a circle should not be capped.

TRAI has also recommended that the current norm of allocating 2G spectrum based on the number of subscribers should be increased several times before existing players are allocated fresh spectrum.

If these TRAI recommendations are accepted by the DoT, then several new applicants will be eligible to get spectrum to launch telecom services.

However, some experts are of the view that the rush for telecom licences is aimed at making a quick buck by first getting the licences and then selling the same to overseas players at a hefty premium.

To get to the bottom of the matter, the DoT is believed to have set up an agency to establish the actual identities of the promoters and shareholders behind the new applications for telecom services.

Telecom Minister, A Raja, said on Sept. 24, that the ministry will prepare a fresh set of guidelines for grant of licences to new applicants. "I have asked DoT secretary, DS Mathur to form a committee to frame guidelines for grant of licence to new applicants,” Raja said.

Sistema, DLF join the telecom race

Russian conglomerate Sistema has finalised an agreement with Indian telecom services provider Shyam Telelink, the unlisted telecom services arm of the Shyam Telecom group, to acquire 74% in the company. The deal values Telelink at a conservative $114 million.

Simultaneously, Shyam has applied to the Department of Telecom (DoT) for unified access service licences (UASL) to operate networks in 21 Indian states.

Shyam’s application comes even as real estate major DLF Ltd today confirmed that it will apply for telecom licences by Friday, the fourth real estate company to have applied for the same purpose. IndiaBulls Real Estate Ltd, Unitech Ltd and Parsvnath Developers are the others. This takes the total number of applicants for telecom licences to 13, including the Reliance Anil Dhirubhai Ambani- backed Swan and Cheetah Telecom, HFCL, Ruia-backed BPL Ltd among others.

The scramble for applicants comes soon after Communications Minister A Raja announced that DoT would not accept any new UASL applications after October 1. Under the terms of the deal, Sistema JS Financial Company, a company listed on the London Stock Exchange, has agreed to acquire 51% in Telelink, which operates a small but well-performing CDMA technology-based wireless network with over 250,000 users in Rajasthan.

Sistema will seek the approval of the Foreign Investment Promotion Board and has rights to enhance its stake to 74%, the maximum that a foreign company can have in an Indian telecomservice provider.

The marks the second time the Russian company is trying to get a foothold in the booming Indian telecom services market. In 2005, Sistema had signed a non-binding agreement to acquire 49% in Aircel (a mobile operator in Tamil Nadu then promoted by NRI businessman C Sivasankaran) for $450 million. The deal fell through even while Sistema was pushing a plan to use part of India’s rupee debt to Russia for financing such bilateral projects.

For Shyam, this marks the second major divestment in its services business – it sold its GSM operation in Rajasthan to Bharti Airtel Ltd in a cash-and-stock deal some years ago.

Industry experts said the key reason for Sistema buying out Telelink rather than applying on its own for a licence is that the latter is already an operator and, therefore, ahead of new applicants in the race for allocation of spectrum.

Sistema is the largest private sector consumer services company in Russia and the CIS. The joint market capitalisation of companies under Sistema Telecom is over $20 billion.

Experts in the telecom business say that realty companies like Unitech and DLF with their large market capitalisation can raise the resources needed for the telecom business. With start-ups requiring over $5 billion to begin operations, most of them see a large upside in the business which is expected to grow to 500 million subscribers by 2011.

"We do not have a telecom partner right now, but we are going ahead and applying for licences. A special purpose vehicle will be set up for the venture," a DLF executive said.

The government is currently reviewing the policy on spectrum allocation and grappling with plans for introducing next-generation high-speed mobile services in India. Since telecom licensing norms were changed in 2003 to allow universal access (before this, licences were dependent on the technology being used), the government granted over 97 such licences.

Coming Soon - DLF TElecom

DLF, the country's largest realty developer, today applied for nationwide telecom licences, days before the Department of Telecom (DoT) is supposed to stop accepting applications.

Communications minister A Raja had recently said that DoT would not accept any applications after October 1.

DLF is the fourth realty company to have thrown its hat into the ring for telecom licences in recent days. While Parsvnath Developers was the first realty company to apply in August, Unitech said it would apply for a licence last week. This week, Indiabulls and DLF have also said they intend to apply for licences.

Trai moots no cap on number of telcos in circle

Telecom Regulatory Authority of India has suggested that there should be no cap on the number of operators in any service area and asked the Department of Telecom to form a multi-disciplinary committee to frame a spectrum allocation criteria.

The committee should have members from DoT, Trai, Wireless Planning and Coordination wing of Communications Ministry and operator associations, the regulator said in its recommendations on reforms in the licensing policy released today.

GSM operators wanted a cap on the number of telcos in a circle saying unlimited players are putting strain on the scarce spectrum, leading to poor services.

The regulator has suggested a one-time fee from operators for allocation of spectrum beyond 10 Mhz. At present, a company pays 1% of its revenue to the government for additional spectrum, being allocated based on the subscriber base.

The suggested charge for allocation of 2x5 Mhz of spectrum in category A circles and Mumbai and Delhi is Rs80 crore, while for category B circles and Chennai and Kolkata, it is Rs40 crore. For category C circles, the one-time fee is Rs15 crore.
For allotment of 1 Mhz spectrum, Trai has suggested a one-time fee of Rs16 crore should be charged.

In the recommendations, which are subject to DoT’s approval, the regulator has also sought auction for future allocation of spectrum except in case of allotment to mobile operator on 800, 900 and 1800 Mhz band.

Trai chairman Nripendra Misra said the one-time fee for additional spectrum is the most neutral criteria to create a level playing field.

On mergers and acquisitions, Trai says the combined market share of merged entities should not exceed 40% in terms of both subscribers and revenue. The current cap is 67%.

Misra said Trai has proposed to use adjusted gross revenue as the basis for
computing revenue-based market share of the merged entities. Besides, other checks and balances have also been put in place to ensure that such M&As do not create a monopoly in the market, he added.

The regulator said the merged entities should be charged spectrum fee based on the total radio wave acquired by them.

Trai also proposed that an operator should be allowed to acquire up to 20% equity in a telco in the same circle. At present, the cap is 10%.

On allowing use of GSM and CDMA technology by the same operator, Trai said an existing licensee may be permitted to use alternate technology to provide wireless access services in a particular area after payment of an upfront fee. This fee should be equal to the entry fee for the unified access license in that area.
The operator wanting to use both the technologies will have to pay fee for both spectrums.

Once approved, this proposal will help CDMA operator Reliance Communications in providing GSM services. The company has applied for GSM license and is awaiting guidelines on the use of both technologies.

Trai said the dual license shall be allotted based on combined adjusted gross revenue to ensure it does not attain an advantageous position against others.
Misra said: “These proposals are far reaching. We are guided by the fact that Indian telecom sector has reached a stage where artificial barrier to competition should be removed to achieve the target of 500 million subscriber base.”