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Home > India > Business > Business Headline > Report

Telecom outsourcing deals under Trai lens

Surajeet Das Gupta & Sunil Jain in New Delhi | May 20, 2008 09:28 IST

The Telecom Regulatory Authority of India has started monitoring changes in the contractual agreements of operators to ensure that they do not adversely impact the annual licence fee earned by the government and follow licence conditions.

The government gets part of the revenue earned by operators as licence fee under the revenue-sharing agreement with operators.

The regulator is currently monitoring the restructuring deals of at least three key companies -- Bharti Airtel's [Get Quote] outsourcing agreements, Reliance Communications' [Get Quote] dual company structure, and Tata Teleservices' [Get Quote] contract with Virgin Mobile.

The regulator is also planning to closely look at the new trend of operators spinning off their tower businesses and assets into separate companies.

Speaking to Business Standard, Trai Chairman Nripendra Misra said: "These are not probes or investigations but we are definitely monitoring. We are not distrusting companies but we must monitor changes."

Misra added, "New companies for the tower business are being formed, the assets are being transferred to them, a sharing formulation will come up and we want to understand what is the relationship that will develop (between the parent company and the tower company). We want to ensure that it does not affect the annual licence fee as various issues on transfer pricing come up."

Taking the example of the structure of the Reliance Anil Dhirubhai Ambani Group telecom business, Misra said it has two companies, one that owns the network assets and the other that is responsible for all the recovery receipts and billing.

"We are looking at who owns the subscriber, whether the billing was going in the name of the parent company or the contracted company with whom they have a relationship, what is the compensation being paid by the parent company to the second company and is that compensation realistic," Misra explained.

Misra said they have already had three preliminary meetings with the company and there is nothing that the regulator has been able to pinpoint.

Giving another example, Misra said that they are also looking into the structure of the Bharti Airtel outsourcing dealwith Ericsson, which maintains their networks.

"Networks are being maintained by others now and we don't even know whether the import of the equipment has come through the outsourced company or come through the parent company. That is what we want to know," he said.

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