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Centre amends telecom operators' licence pacts — Cuts fees by 2-4 percentage points

G. Rambabu

New Delhi , Jan. 28

THE Government has finally delivered on its promise of reducing the licence fees for basic and mobile telecom operators by between two and four percentage points starting fiscal year 2004-05.

According to official sources, the Department of Telecommunications (DoT) has written to all the existing operators stating that the licence agreements have been suitably modified and the revised fee structure will be applicable from April.

While the existing licence fee structure for basic as well as cellular operators has been fixed at 12 per cent of their adjusted gross revenue (AGR) for metro service areas and category A circles, 10 per cent for category B circles and 8 per cent for category C circles, the amended licence agreement has brought it down by two percentage points across the board for all operators.

In addition, the first and second GSM cellular licensees in all circles, except the metros, would get an additional two percentage point reduction in the licence fees for four years.

The sources noted that with this, the Government has kept its word on implementing the financial relief package that had been announced in end-December, which led to the withdrawal of the petition in the Supreme Court by the Cellular Operators Association of India (COAI).

The remaining aspects of the package - increase in FDI limit and intra-circle mergers - too is likely to be cleared by the Union Cabinet in the coming days, they said.

The officials were, however, were non-committal about the latest demand by the telecom operators to modify the definition of AGR in calculation of licence fees. While accepting the fact that they had received the representation from the operators, they noted that a final decision on the matter is yet to be taken.

It may be recalled that the telecom service providers had recently written to the DoT stating that the present definition of AGR includes several revenue streams, which are unrelated to service activities of the telecom operators.

They include interest revenues, revenues from sale of handsets, interest and dividend income from investments, sale of capital goods and cost recovery from sharing infrastructure.

These revenues are completely unrelated to the licence activity of the service providers and are irrational and unjustified to include the same for the purpose of calculating revenue share licence fees.

Furthermore, the AGR definition does not allow for deductions due to bad debts, waivers/discounts to subscribers, roaming charges, which are form of pass through revenues and port charges, the operators had written.

Although the TRAI has come out in favour of these demands and reiterated that only those revenues that accrue from operations under the licence should be considered while computing revenue share calculation, the DoT is yet to take a decision, the sources said.

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