Finance Ministry objects to dual tech mobile licences

14Dec07

Chennai, Dec. 13 The Union Finance Ministry has written to the Department of Telecommunications asking it to “stay” the implementation of the grant of crossover licences for CDMA operators to commence GSM operations.

The November 22 letter written by Mr D. Subbarao, Finance Secretary, to Mr D.S. Mathur, Secretary, Department of Telecommunications, states that in the presentation on the spectrum policy to the Cabinet Secretary on November 20, Mr Mathur had mentioned that three CDMA operators were given crossover licence for GSM operations; that the fee for this licence was determined as Rs 1,600 crore and that one licensee had already paid the fee.

“The purpose of this letter is to confirm if proper procedure has been followed with regard to financial diligence. In particular, it is not clear how the rate of Rs 1,600 crore, determined as far back as in 2001, has been applied for a licence given in 2007 without any indexation, let alone current valuation. Moreover, in view of the financial implications, the Ministry of Finance should have been consulted in the matter before you had finalised the decision. I request you to kindly review the matter and revert to us as early as possible with responses to the above issues. Meanwhile, all further action to implement the above licences may please be stayed,” the letter says.

It also sought details of permission granted and the dates on which such permissions were granted to CDMA operators.

Thomas K. Thomas from New Delhi adds: When contacted, DoT officials said that the issue of crossover technology was sub-judice and all future decisions of the Government would depend on the judgment of the Telecom Dispute Settlement Appellate Tribunal. GSM operators including Bharti Airtel, Vodafone Essar and Idea Cellular have challenged DoT’s decision to allow dual technology to Reliance Communications. Their primary contention is that the DoT did not follow the right process in permitting RCOM to foray into the GSM segment. Three other companies, Shyam Telecom, HFCL and Tata Teleservices, have also applied for crossover licences.

Cos keen to bid The Finance Ministry’s objections assume significance in the light of bids put in by various companies including Bharti Airtel, STel and Idea Cellular. All the three companies have offered to pay in excess of Rs 1,650 crore – the amount paid by Reliance Communications for taking crossover licence. While STel has offered to pay Rs 6,000 crore, Bharti has said that it was willing to participate in an auction with an initial bid of Rs 2650 crore.

The Prime Minister, Dr Manmohan Singh, has also said that the spectrum policy should not lose sight of the revenue earning potential to the Government. Dr Singh on Wednesday said that spectrum allocation should be fair, transparent, equitable and forward looking. However the Communications Ministry has maintained that though auction was a fair and transparent way to allocate spectrum, it would create legal barriers for new players.

Sources in the Communications Ministry pointed out that even the telecom regulator and the telecom commission had recommended allowing crossover technology. They also said that revenues would be generated through auction of 3G spectrum and by issuing licence to new players and therefore the concerns raised by the Finance Ministry were being addressed.

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