After the HC verdict, DoT offers olive branch to cellular firms

The DoT has also offered to give cellular companies reprieve till December 31, for paying their licence fees for the third year. It has however, warned that all companies with outstanding dues to the Department will be required to securitise their dues – which would entail extending their bank guarantees and also agree to pay a 5 per cent penal interest rate over and above the Prime Lending Rate (PLR) as mentioned in the tender conditions.

The DoT has now stated that if the offer is agreeable to all thecompanies, they would have to endorse it in writing individually only after this would the DoT on the action plan. The cellular operators have been given four to five days time in which to respond to the offer. The Cellular Operators Association of India (COAI) is likely to meet again early next week to discuss their strategy regarding the new offer from the DoT.

The cellular industry which was reeling under the impact from yesterday’s High Court severely curtailing the TRAI powers, is likely to feel some restoration of confidence from Department of Telecommunication’s latest offer. Operators had felt that the security of their investments would be lost unless the Regulator had a predominant role to play in removing unfair commercial conditions working against them.

Cellular operators are reeling under heavy losses as the market demand for cellular phones has been largely below their expectations and their business plans have gone haywire. Apart from two companies – Escotel and Birla AT&T- none of theother have got their finacial closures and are extremely dependent on the concessions to keep their head above water. The concessions are likely to help them in improving their liquidity making cash available for market expanding exercises whereas the extension of the licence period will enable them to improve the viability of their projects and hence improve the prospects of obtaining term loans for their projects.