The Hindu Business Line : Bharti, Reliance work out lower licence fee payouts

In a first of its kind case, national long-distance operators Bharti Infotel and Reliance Infocomm have separately applied for Infrastructure Provider category 2 (IP-2) licence, despite the fact their existing licence allows them to offer all services under IP-2. The reason, for the move, is to save on 9 per cent licence fee.

While an NLD player pays 15 per cent of its revenues annually as licence fee, an IP-2 licence holder pays only 6 per cent. Therefore, if an NLD licence holder takes an IP-2 licence separately it will stand to gain 9 per cent of the revenue share.

IP-2 category licence is part of the NLD licence. However, the huge difference in the licence fee makes it attractive for companies to take separate licences for each category. Infrastructure provider licence holder is not allowed to sell bandwidth directly to the end-consumer. They can only sell it to other telecom service providers. Companies such as Gas Authority of India Ltd, PowerGrid and RailTel are IP licence holders and lease out cables from their excess capacity. These companies pay a fee of 6 per cent of their annual revenues. On the other hand, when operators such as Bharti and Reliance perform the same function under an NLD licence, they pay a fee of 15 per cent of the annual revenue.

However, the Department of Telecom may now allow the two companies to take advantage of the licence regime. Senior DoT officials said such a move could result in double licensing and will have wider ramifications for the industry. They pointed out that IP-2 licence was restrictive in nature and was aimed at companies which do not have telecom as its core business. "The objective of having an IP-2 licence was to allow non-telecom companies with excess capacities to sell bandwidth in areas where telecom infrastructure is poor. It will not be proper to issue IP-2 licence to an NLD which have a wider scope of services. Further, the companies may apply for an IP-1 category licence for which there is no licence fee," DoT officials said.

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