The government of India last month revealed a new telecommunications policy that aims, among other things, to rectify issues surrounding licensees of basic and cellular services, to redefine the competitive nature of the country’s telecom industry and to strengthen its independent telecom regulator, the Tariff Regulatory Authority of India.
Several foreign investors became involved in India when the government auctioned off cellular licenses in 1992. The total amount bid for the 10-year licenses reached $6.57 billion.
Much like the situation surrounding the Federal Communications Commission’s C-block auction and shakeout in the United States, several license winners in India since have run into financial hurdles. In addition to hefty buildout costs, carriers are finding wireless usage, which had been expected to average 250 minutes per month per user, has not lived up to expectations.
Nationwide, cellular operators have accumulated a loss of more than $500 million, based on some estimates, and the net loss of the eight operators in the four licensed metro areas has hit $175 million since service began.
“The government recognizes that the result of the privatization has so far not been entirely satisfactory,” said the government. “While there has been a rapid rollout of cellular mobile networks in the metros and states with currently over 1 million subscribers, most of the projects today are facing problems.
“The main reason, according to the cellular and basic operators, has been the fact that the actual revenues realized by these projects have been far short of the projections and the operators are unable to arrange financing for their projects and therefore complete their projects,” the government said.
The plan also calls for India to depart from auction schemes to award licenses, moving instead to a system in which carriers would pay a one-time entry fee determined by the Telecom Regulatory Authority of India, as well as license fees based on a revenue-sharing arrangement with the government.
In addition, the government said the state-owned telephone company Mahanagar Telephone Nigam Ltd./Department of Telecommunications will be licensed as the third wireless operator in each service area. MTNL would be required to pay a licensee fee, said the government, but given its “immense rural and social obligations, the government will reimburse (the) full license fee to the DoT.”
