Date:12/03/2004 URL: http://www.thehindubusinessline.com/2004/03/12/stories/2004031202550300.htm

Back DoT may cut licence fee for long distance

G. Rambabu

New Delhi , March 11

HAVING granted financial sops to basic and cellular operators by way of a reduction in their annual licence fees starting April 1, the Department of Telecommunications (DoT) is now evaluating a proposal to pass on similar benefits to the national long distance (NLD) and international long distance (ILD) operators.

According to official sources, as per the proposal, the annual revenue sharing licence fees of these operators are to be slashed by as much as five percentage points, from the current rate of 15 per cent of their adjusted gross revenues (AGR). At the present level of traffic and tariffs, this works out to a benefit of Rs 250 crore for the operators, they noted.

The sources pointed out that since the licence fees of basic and cellular operators have been cut by two percentage points, it is only fair that a similar licence fee cut takes place for the long distance operators too.

The major beneficiaries of this move would be Bharat Sanchar Nigam Ltd (BSNL) and Videsh Sanchar Nigam Ltd (VSNL) who have a dominant market share in the NLD and ILD sector. The other players such as Bharti, Reliance and Data Access too would benefit in the long run once their market share picks up, they said.

"Based on the recommendations of the TRAI in 2001, the licence fee for basic service had been pegged at 12 per cent, 10 per cent and 8 per cent depending on the circles of operation, and a similar rate was prescribed for cellular services to bring about a level playing field. These rates have been further reduced by two percentage points starting next month. However, the fees for long distance operators have not been changed since 1999 and there is, therefore, a strong case for a reduction," they said.

In any case, they noted that BSNL will be the biggest beneficiary since it already has a near-monopoly in NLD and is also starting ILD services soon.

The maximum traffic is carried by BSNL and, therefore, any reduction will give maximum advantage to the company to plough back funds for growth of its network, they observed.

The sources also pointed out that any reduction in licence fees is likely to reduce the carriage cost which will lead a further reduction in tariffs for the benefit of the consumers.

They, however, noted that a final decision on the matter can be taken only after the new Government is in power, since there is a freeze on any policy implementation at present.

Further, the TRAI is also working out guidelines on the proposed unified licence regime, which seeks to bring all telecom services under one umbrella.

"As the recommendation for unified licence encompassing all services is likely to be submitted in the second quarter of the calendar year. The issue of reduction of licence fee for NLD and ILD operators can be taken only at that point of time," they said.