BSNL seeks exemption from 3G spectrum fees3 min read . Updated: 21 Apr 2010, 10:16 PM IST
BSNL seeks exemption from 3G spectrum fees
BSNL seeks exemption from 3G spectrum fees
New Delhi: State-run telecom company Bharat Sanchar Nigam Ltd (BSNL) has sought an exemption from paying the licence fee for the 3G telecom and broadband wireless access (BWA) services, auctions for which are currently on.
This, despite the Telecom Regulatory Authority of India (Trai) recommending otherwise.
According to the auction policy, based on the New Telecom Policy 1999 (NTP 99), both telcos are required to pay the price discovered at the end of the bidding process, though BSNL claims that the policy provides for state-owned telcos not paying anything at all for spectrum.
Given that after nine days of the ongoing 3G auction, the price for a slot of 3G spectrum across the country has risen by 89.5% above the base price of Rs3,500 to Rs6,635 crore, BSNL fears the final price may be too high. So far, 58 rounds of bidding have been completed by Wednesday. In terms of the bidding amount, the top three bids received were for Delhi, at Rs771.11 crore, Mumbai with Rs708.81 crore followed by Tamil Nadu at Rs682.92 crore.
Earlier this week minister of communications and information technology, A Raja, said that the government expects to make around Rs45,000 crore from the ongoing auction of frequencies.
BSNL may have to spend $2-3 billion on the spectrum if it is required to pay for it. That will put pressure on the telco’s financials; the telco is expected to post a loss of at least Rs2,600 crore in the 2010 fiscal on revenues of Rs32,966 crore, primarily due to the revision in pay scales announced by the government which will benefit its three lakh employees
“The NTP 99 has a provision where BSNL should not have to pay licence fees," Kuldeep Goyal, chairman and managing director of BSNL said. “We are looking into it but if we have to pay for the spectrum, then we have to pay as we are already using it," he added.
NTP 99 does allow for the money paid on licence and spectrum fees by BSNL to be refunded to the telco from the so-called universal service obligation fund, which has been set up to underwrite spread of telephony to remote rural areas.
In the past, BSNL has been reimbursed the amounts spent on licence fee. The telco received complete reimbursement of licence fees from 2001-02 to 2003-04 as compensation for providing telecom services in rural markets. In 2004-05, such reimbursement of licence fees from the government was restricted to two-third of the levies the telco paid; this was further reduced to one-third in 2005-06. Since then, BSNL has not been reimbursed its licence fee payments. Between 2001 and 2005, BSNL received licence fee refunds in excess of around Rs9,000 crore.
In March 2009, BSNL and the department of telecommunications (DoT) signed a memorandum of understanding to provide the telco a subsidy of Rs6,000 crore over three years to sustain its rural operations.
A telecom ministry official confirmed that BSNL had been lobbying for an exemption or reimbursement in the case of 3G and BWA spectrum too.
“They are asking that the money be refunded as it has been done with the licence fee for the existing services as it is mandated in the NTP 99," a senior official of the DoT said, speaking on condition of anonymity as he is not authorized to speak to the media. “So far it has just been informal discussions, but they will probably send a formal request soon," he added.
BSNL is also looking at the option of being allowed to defer the payment for the spectrum over two years until it has completed its restructuring programme as suggested by the Boston Consulting Group last year and the Sam Pitroda committee in February, a senior BSNL official said, asking that he not be identified.
The state owned telco has been able to keep its revenues stable for the past two years primarily due to the interest on Rs35,000 crore it has as reserve funds.
BSNL’s top management does not believe the finances will improve till the restructuring is complete and, therefore, does not want to reduce this reserves just yet.
“On one side there is the need to be sympathetic to them given the need for the restructuring and the fact that it is not really their fault that they are in this condition. But, on the other hand, they need to learn how to compete with the private sector, which they don’t know. The government’s interference has to be removed and the board needs to be given complete control of the company," B.K. Singhal, former chairman and managing director of Videsh Sanchar Nigam Ltd (Now Tata Communications Ltd) said. “The restructuring will not work till the board is given control."