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.