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Reliance, BPL to lay cables. - Views on News from Equitymaster
 
 
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  • Apr 27, 2000

    Reliance, BPL to lay cables.

    In a trendsetting move, the government of Maharashtra has permitted the setting up of optical fibre cables in the state by private players free of charge.

    Reliance, BPL and Finolex, all leading companies in the private sector with a presence in telecom, are expected to be the major contenders for the same.

    Permission is to be given on an immediate basis to private players by way of a lease agreement extending to 30 years. The cables are expected to be laid alongside the roads. The quid pro quo for the companies would be free connectivity for 30 years.

    The recent decision will ensure a level playing field for private players, as it was only recently that the state government exempted the Department of Telecommunications and Mahanagar Telephone Nigam Ltd from land lease charges.

    The above decision will enable the private players to extend the reach of their telecom services to more and more subscribers and render them in a more efficient way as optical fibre cables allow more of bandwidth and are conducive to more speedy and efficient services.

    It remains to be seen whether these private players would resort to issue of shares, ploughback of internal accruals or raising of debt for laying these cables. The approximate cost of laying cables is Rs 750 per metre. Raising funds by way of equity or selling stake to foreign collaborators or foreign institutional investors seems to be the best route as the telecom industry is the fastest growing industry in the country.

    The above move is expected to pave the way for more state governments to act similiarly, as most of the state governments are starved for funds and private players who have deep pockets are eager to make their presence felt. This arrangement is the ideal way out as state governments cannot directly sell land itself to private parties and can only sell the rights thereto.

     

     

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