This story is from December 7, 2007

DoT ready to offer LoIs

Shalini Singh / TNN / Dec 7, 2007, 00:26 IST

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Telecom minister A Raja is learnt to have cleared changes in licence conditions for grant of letter of intents to companies that applied for licences before September 25 2007.

NEW DELHI: Telecom minister A Raja is learnt to have cleared changes in licence conditions for grant of LoIs (letter of intents) to companies that applied for telecom licences before September 25 2007.
A senior DoT official said though the policy clearance had been given by the minister almost a month ago, the departments finance and licencing cells had suggested certain changes, which were cleared by Raja on Thursday.ToI had reported on December 1 that LoIs would be cleared within seven days.
However, it is clear that the issuance of LoIs will not reduce the uncertainty among those who receive them. This is because the inter se priority for processing these LoIs is not clear and requires a policy change. If a policy is not announced, several parties, depending on their positions in the queue, are expected to litigate on the matter of inter se priority, which is, date of application versus date of payment of licence fees.
Secondly, a majority of the companies, which have applied for licences, have major or minor glitches in their applications. Usually, the DoT receives clarifications before issuing LoIs. Given that the LoI needs to be converted within a fixed time period, it is not clear how individual companies will be prioritized, especially since they will need to provide clarifications to the application and fulfill other eligibility criteria like bank guarantees, followed by license fee payments.

The next risk arises from the fact that the LoIs may be issued to as many as 22 companies, which include ByCell, Tata Tele, Idea, Spice, Swan, Cheetah, HFCL, STel, Parvsnath, Datacomm, Shipping Stop Dot Com, Allianze, Adonis, Asaka, Shyam Telelink and Selene (Indiabulls).
On the other hand, there may be spectrum for no more than two or three companies at a pan India level. It is a high-risk proposition for companies to pay up and wait indefinitely, not just for allocation of spectrum, but without knowing if they will get any spectrum at all. This is especially true for companies whose priority falls after HFCL.

The next risk arises out of the gap between licence fee payment and actual spectrum allocation. It could take at least two to four months if not much longer for the Defence forces to release spectrum. During this period individual companies will have to bear the carrying cost in the hope that they will get spectrum and then excite an investor.
The last uncertainty arises from the fear of litigation, which can delay the entire process of spectrum allocation. Several parties depending upon inter se priority definition or those who have been cut off from the list of 575 applications because they applied after September 25 2007 can go to court and seek a stay for a variety of reasons.

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