DoT sets terms for private STD firms - Views on News from Equitymaster

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DoT sets terms for private STD firms

Mar 9, 2000

The Department of Telecommunications (DoT) has prescribed a minimum revenue share of 15% as annual license fee for companies venturing into national long distance services. The DoT has also stipulated that there will be no reserve price for the bids. The Telecom Regulatory Authority of India (Trai) had earlier recommended that there should be a one time fee of Rs 5 bn and revenue share of 5%. The Trai had also suggested that the new entrants have a minimum net worth of Rs 25 bn and have experience in this field. While the DoT has accepted the minimum net worth criteria it has done away with the experience requirement.

With the DoT laying out the rules for entry into the long distance telephony sector, the process of private sector participation has moved a step further. Among the most interesting and noteworthy recommendations is the choice given to the consumer to select a service provider for making a STD call.

The opening up of the domestic long distance telephony services is the next big step in the government's endeavour to open telephony services to the private sector. Earlier private participation was permitted in the domestic basic (local) telephony services. The government also permitted private players to offer cellular telephony services in regions across the country. Now with the STD market opening up, the process will be all but complete.

Although the size of the market is very large it must be borne in mind that the Trai has implemented a three-year tariff reduction plan, the first part of which was implemented last year. Under this plan, the tariffs will be reduced by 42% over this period. This is likely to put pressure on realisations unless the volume growth picks up dramatically.

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