Telecom licences can be split, sold

The government has allowed telecommunications companies to sell individual service licences.

Till now telecom operators could sell the company that held the licence and not the licence itself.

The decision taken by the Cabinet allows telecom service providers to club or split their licences. This will benefit companies like Hutchison, which wanted to buy Spice Telecom's cellular licence in Punjab but could not because Spice also has a licence in Karnataka.

The move will also benefit multi-service telecom companies like Bharat Sanchar Nigam Ltd, Reliance Infocomm and Bharti Tele-ventures, which can now restructure their equity and club licences.

Reliance, for instance, can split its cellular,  fixed-line and long-distance operations.

There are some preconditions though for a licence to be sold. The buyer will be responsible for the conditions of the original licence, including rollout obligations.

Dues to the government would have to be cleared before the sale, and the buyer would have to pay any unpaid dues, Parliamentary Affairs Minister Sushma Swaraj said.

Besides, the sale of licences will have to conform to the 49 per cent foreign investment cap in the telecom sector. And competing firms in one circle cannot buy the other's licence.

Swaraj said the new flexibility  would aid consolidation in the telecom industry and would promote efficiency.  The industry had sought the flexibility and the proposal was cleared by a ministerial group on telecommunications and information technology.

"The conditions set by the government are on expected lines. Overall, it is a good move and it will give an impetus to the growth of the sector," T V Ramachandran, director-general, Cellular Operators Association of India, said.

• The buyer would have to satisfy eligibility conditions as per the licence agreement, like net worth.
• New licence holders would meet roll out obligations.
• Past dues to government will have to be cleared before the sale.
• Multi service operators like Bharti, BSNL and Reliance to benefit most.
• DoT to work out amendment to licence agreement.