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Corporate Aug 2, 2013

DoT issues new guidelines for Unified Licenses, bans cross-holdings by telcos

By Firstbiz Editors

The Department of Telecom uploaded guidelines for Unified Licenses for telecom companies late this evening on its website. These norms were eagerly awaited by telcos since they signify that finally, licenses for telecom service providers will be delinked from spectrum. Also, now telcos can offer all services that existing licenses permit while being able to share spectrum and telecom infrastructure, something the earlier licensing regime did not permit.

The guidelines specify that the licensee "shall not hold any other license for the services covered under the scope of Unified License. In case the Licensee obtains any other License by way of acquisition or merger, the License so obtained shall have to be migrated and merged to the aforesaid Unified License as per prescribed procedure." This could well mean that the DoT has, in one stroke, abolished cross holdings in the same telecom circle. Put simply, this means now no telecom operator can hold any stake in a rival operator in the same circle. As of now, an operator can hold upto 9.99% stake in a competitor in the same telecom circle.

So many telecom firms have tie-ups and stake in other licensees. Such telcos have one year to comply with the new norms. For example, Vodafone Plc is the majority stakeholder in Vodafone India and also holds a 4.4 percent stake in Bharti Airtel.

Image used for representational purposes only. AFP

Image used for representational purposes only. AFP

Not just abolishing cross-holdings, the UL guidelines also make it mandatory for licensees to migrate to the UL if they wish to expand the scope of their service to include any additional service or service area. In case of merger and acquisition by licensee with a telecom service provider that has not migrated to UL, the merged entity will have to migrate to UL.

Upon migration, the new UL shall be for a period of 20 years, irrespective of the validity period of the licence it already held. But the option of renewal for further 10 years also exists, with the guidelines saying "The Licensor may renew, if deemed expedient, the period of License by 10 years at one time, upon request of the Licensee, if made during the 19th year of the license period, on the terms specified by the Licensor, subject to extant policy. The decision ofthe Licensor shall be final and binding in this regard."

The guidelines also provide for a "set off" in case any sum of money is either recoverable or payable by the licensor to the licensee. The UL will be given only when a telco shells out Rs 15 crore as non-refundable entry fee as well as an annual License fee as a percentage of Adjusted Gross Revenue (AGR) service-area wise. The License fee shall be 8 percent of the AGR, inclusive of USO Levy which is presently 5 percent of AGR.

The new guidelines specify that in case the Licensee obtains access spectrum for operation of any authorised service in a service area, a 'presumptive AGR' for that authorised service and service area shall be calculated and the License Fee based on presumptive AGR shall be applicable from the date of issue of Letter of Intent earmarking such spectrum or the effective date of the license/authorisation, whichever is later.

In case the Licensee obtains spectrum for any service and service area indifferent bids, the total presumptive AGR shall be the sum of the presumptive AGRs calculated on the basis of the respective Bid amounts.

UL is part of the government's plan to adopt 'One Nation - One Licence' strategy. In the new licensing regime, spectrum will be de-linked from licences. While one company can only hold one licence, it can get permits for multiple services including access, internet, national long distance, international long distance etc.

by Firstbiz Editors

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