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DoT fixes satellite phone licence fee

A committee of Department of Telecommunications officials finalised this recently.

T O D A Y

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The decision to peg licence fees at 16 per cent of gross revenues is to be incorporated in the licence agreement for satellite telephone operators within a week or two, DoT officials say.

DoT had committed to finalise the agreement by November 1, after the cabinet cleared the satellite telephone policy last month.

Among satellite telephone operators that plan to offer services in India are Iridium India, a venture between Indian financial institutions and Motorola; ICO, Videsh Sanchar Nigam Limited and ICO Global; Globalstar, originally a joint venture between PCL, Crompton Greaves and Hyundai; and Aces, a Shyam Telecom and Indonesian venture.

Others waiting on the sidelines to set up operations include Teledesic, a Microsoft-Boeing-Motorola consortium, and Afro-Asian Communications promoted by media magnate Subhash Chandra.

This is the first time that the government has agreed to use the revenue-sharing method while computing licence fees in a departure from the past when it has preferred to levy a flat annual fee arrived at by itself or through bidding.

DoT officials admitted that the decision to use revenue-sharing reflects a new thinking that the upfront licence fee method has failed.

However, DoT's decision to impose a licence fee equivalent to 16 per cent of gross revenue has not been welcomed by satellite telephone companies.

A senior executive of one of the companies said "There is a good deal of confusion over what they mean by gross revenues. Is it the total revenues of the Indian satellite telephone company or is it what it gets to retain?"

The Indian arms of most satellite telephone companies are structured such that Indian partners own 51 per cent equity with the remaining 49 per cent held by foreign partners.

Such a structure is adopted since regulations prescribe 49 per cent equity ceiling in telecom joint ventures. To compensate for the lower equity stake, a revenue sharing agreement in favour of the foreign partner has been worked out in most cases.

Under terms of this pact, the foreign partner receives a significant portion, between 40 and 70 per cent, of the Indian arm's revenues.

Further, the Indian arm has similar revenue sharing agreements, akin to the pacts between telecom operators, with DoT and VSNL on the one hand, and with foreign operators on the other.

This leaves the Indian partner with significantly less revenue.

For instance, Iridium India has just 10 per cent of the total Indian operations' revenues accruing to it. Therefore, if DoT defines gross revenues as the total revenues of the Indian operations, the Indian arm in most cases will be making losses.

- Compiled from the Indian media

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