The government on Wednesday announced fresh concessions of over Rs 960 crore (Rs 9.60 billion) annually for the telecom industry with a focus on cellular operators to compensate them for high licence fee, a move coinciding with the decision of cellular players to withdraw the case against WLL mobile services in the Supreme Court.
Announcing the package, Communications and IT Minister Arun Shourie said licence fee has been reduced by two percentage points, from 12, 10 and 8 per cent, across the board and an additional benefit of 2 percentage points reduction in revenue share granted to first and second cellular licencees for a period of four years.
The package comes into effect from April 1, 2004.
The minimum licence fee, however, has been pegged at five per cent of the gross adjusted revenue which would go towards universal obligation fund, Shourie said.
The ministry has also revived its earlier proposal to hike foreign investment in telecom to 74 per cent from the existing 49 per cent with direct investment remaining at 49 per cent and additional to come from foreign institutional investors.
"We shall take this proposal to the Cabinet soon," Shourie said, adding the entire package was approved by Prime Minister Atal Bihari Vajpayee on Tuesday.
Of the two percentage point reduction across the board, Shourie said the government has estimated a loss in the revenue of upto Rs 885 crore (Rs 8.85 billion) during 2004-05 of which Rs 225 crore (Rs 2.25 billion) benefit would accrue to private operators, Rs 560 crore (Rs 5.60 billion) to BSNL and Rs 100 crore (Rs 1 billion) to MTNL.
Shourie said the additional benefit of two percentage points to cellular industry would cause a loss in the revenue of Rs 83 crore (Rs 830 million) annually and Rs 332 crore (Rs 3.32 billion) over a period of four years.
This benefit of additional two percentage points would be extended only to the operators offering services in the circles and not in the four metros.
For instance, Sunil Mittal-owned Bharti Group would not get this benefit for its licence in Delhi.
"The ministry of finance will also facilitate a dialogue of cellular companies in financial distress with financial institutions for debt relief steps," Shourie said.
Asked if the package was offered with a condition that the cellular operators should commit to withdraw WLL case, the minister said, "There was no condition from either side."
On the enhanced FDI limit, Shourie said a revised proposal has been submitted to Deputy Prime Minister L K Advani taking a note of reservations of intelligence agencies on its earlier proposal.
Shourie said the government had been in talks with various operators to "lower the temperature in the industry" and to ensure that the sector attracted investments.
Of the entire package, three items pertaining to FDI, merger and acquisition and debt restructuring would be subject to Cabinet approval, while lowering of licence fee would be approved by the ministries of communication and finance jointly.