The Hindu Business Line : DoT gets tough with new mobile players on rollout

The wrong tone
Operators were to cover at least 10% of each district headquarters in a circle in the first year
Barring Sistema Shyam none of the firms has even launched their services

Thomas K. Thomas

New Delhi, Feb. 10 The Department of Telecom is turning the heat on new mobile players for not launching services despite having given out the licences almost a year ago.

The DoT has asked all the new players to submit details of the network set up so far including the number of base stations and location of their mobile switching centres.

According to the service conditions specified in the licence, operators are required to cover at least 10 per cent of each district headquarters in a circle in the first year. Since the licences were given out in February last year, The DoT has proposed to impose a penalty on the new players for not meeting the roll out obligation at the end of first year.

Barring Sistema Shyam, none of the companies has even launched their services. Unitech, Swan, Datacom, Loop Telecom, ByCell and S Tel were among the companies which had bagged the licences. None of them have even placed orders for network equipment let alone owning a subscriber.

While Sistema Shyam has launched its services in Rajasthan, other operators are still working out their partnerships, network vendor and overall business model. Datacom’s plans have got hit by a dispute between its promoters, while Unitech is awaiting the closure of an equity deal with Norway based telecom firm – Telenor. Swan and Loop have come under the scanner of various Government agencies for alleged violations.

According to industry estimates, these operators will take at least another 6 months to cover 10 per cent of each district headquarters after launching the service. This means that the new companies may be able to complete the target only by the end of next year instead of February 2009.

Spectrum delay

The new players blame delay in getting spectrum from the Government for pushing back the launch date. However, DoT rules are very clear in specifying that licence holders cannot blame lack of spectrum or delay in getting Government clearances for not fulfilling the roll out obligation.

According to the licence, “The time period for provision of the service stipulated in this licence shall be deemed as the essence of the contract and the service must be brought into commission not later than such specified time period. No extension in prescribed due date will be granted.”

Although the DoT had earlier considered diluting the roll out obligation by doing away with the mandatory target at the end of the first year, this proposal was not agreed to by the Communications Ministry. The Ministry had given out spectrum and licences to the new players, despite opposition from incumbent players, in order to increase competition in the cellular segment which in turn would have resulted in lower tariffs and more choice for consumers. However, with neither of the new players starting commercial service, the DoT is now looking to put some pressure on them.

In the past, the DoT has asked defaulting operators to complete the roll out by laying fixed line network. It has even imposed liquidated damages on some companies which have failed to comply with the licence conditions. The DoT can impose a fine of Rs 5 lakh/week for the first 13 weeks of delay, Rs 10 lakh for the next 13 weeks and thereafter at the rate of Rs 20 lakh for delays of up to 26 weeks. If any operator fails to fulfil the obligation even after 52 weeks of delay, then the DoT has the power to cancel the licence.