Business - India;DOT plans to ease network rollout norms

Anandita Singh Mankotia

Communications & IT minister A Raja, who is in the eye of a storm over alleged underselling of licences to new telecom operators, could soon find himself embroiled in a fresh controversy. The department of telecommunications (DoT) has now mooted a proposal to relax the rollout norms for new licensees, thereby saving fledgling players like Swan, Unitech and Datacom from paying hefty penalties.

According to DoT sources, the proposal seeks to waive the condition of rolling out at least 10% of a network in district headquarters by the first year of licence allotment. New operators must achieve 50% rollout in three years.

DoT says the year-one deadline is impractical as new operators face inordinate delays by state government agencies in clearing right of way and in obtaining various other municipal clearances. It has, therefore, suggested that these operators be audited for meeting rollout obligations only at the end of year three.

“The year-one criteria is unfair as spectrum allotment takes some time, and one has to wait for it to be vacated or relocated. Secondly, setting up a network requires clearances from the states and this is time-consuming. A time span of three years is fair and would give them time to factor in these problems. It is more realistic,” a DoT official told FE.

If the rollout norms are indeed relaxed at this stage, companies like Swan, Unitech, Datacom, S Tel and Loop Telecom would be major beneficiaries. Their year-one deadline expires in January and, according to industry sources, they are unlikely to meet the 10% coverage obligations by that time as in most cases they have not even achieved financial closure. A maximum penalty of Rs 7 crore per circle is levied on licensees failing to meet the year-one deadline.

In an attempt to simultaneously mollify existing operators like Bharti Airtel, Vodafone-Essar, Idea Celluar, and Reliance Communications, DoT also proposes sops for them, too. Though these companies have largely achieved their rollouts, they still fall short in regulation in-building coverage (ensuring that 99% signals can be received inside large buildings).

According to rough estimates, around Rs 600 crore in penalties are due from these companies if DoT fines them for failing to provide foolproof in-building coverage. DoT has suggested relaxing this requirement in line with the recommendation by industry body Cellular Operators’ Association of India, which says current in-building norms are too strict.

As reported by FE, new operators have been urging the government to relax the rollout obligations as they face difficulties in raising the funds required to lay their network. For a pan-India network, a new operator needs to invest Rs 22,000 crore just to meeting the rollout obligation in the first year.

Raja’s largesse

The story so far:

•New operators received a pan-India licence for Rs 1,658 cr. If auctioned at market rates, they would have cost Rs 8,000 cr

•A new operator with spectrum in 13 circles would have to invest roughly Rs 13,000 cr to meet the year-one rollout obligation

•Moreover, a new operator with more circles than it has spectrum for would have to roll out wireline services in the interim