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Telecom: Freer markets on the anvil - Views on News from Equitymaster
 
 
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  • Sep 2, 2000

    Telecom: Freer markets on the anvil

    Here come the free markets (what we had only read of) and consequently more competition. The Telecom Regulatory Authority of India (TRAI) has recommended unlimited competition in basic telephony services.

    The earlier policy permitted only two fixed service providers (FSPs) in each circle. This included the incumbent (DoT or MTNL) and one private FSP. The bidding process saw unrealistic offers as a duopoly environment was envisaged.

    Subsequently, the new players could meet their license fee payment schedule and after much debate the regulator recommended a shift to a revenue sharing agreement.

    Under the new recommendations TRAI has dismantled the duopoly status in all the 21 circles. It has classified each circle into three categories (A, B & C) depending on the revenue generating capacity of the circle.

    The recommendations include a one-time entry fee of Rs 10 m to Rs 500 m depending on the circle. A licensee fee component of 12%, 10% and 8% of gross revenue for the circles A, B and C respectively. The amount of license fee, for the existing private FSP's, due upto the date of migration will be treated as the entry fee.

    Although the sector has been thrown open to competition the regulator has enclosed certain clauses for ensuring entry of financially stable parties. It has recommended a minimum networth for each of the circles. The equity participation of the promoters will depend on whether or not they have experience in this field.

    The TRAI has put forward these recommendations, which have to be approved by the DoT. There maybe time before the sector is thrown open. But going by the way telecom sector initiatives are being announced these recommendations should see the light of day.

     

     

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