Government accepts plan to open up overseas telephony

NEW DELHI: The government has accepted entry rules proposed by the

telecommunications industry regulator for allowing private companies into

international telephony, a federal minister said on Thursday.

"The government has decided to accept all the recommendations of the

TRAI (Telecom Regulatory Authority of India) in regard to international

long-distance telephony," Pramod Mahajan, minister for communications and

information technology, told a news conference.

TRAI earlier this week suggested a set of rules for the government to

consider when it ends the monopoly of state-owned Videsh Sanchar Nigam Ltd. and

ushers in private competition next April.

The government's decision is crucial for the privatization of state-run VSNL,

which is in its final stages. The privatization, billed as India's biggest in a

decade of economic reforms, has been repeatedly delayed because of a lack of

rules for the entry of private firms into the business.

On Monday, the Telecom Regulatory Authority of India (TRAI) suggested the

government open up the business to unlimited competition and said private firms

be charged a one-time non-refundable entry fee of Rs 250 million for a 20-year

license.

The TRAI suggested the government also take an unconditional bank guarantee

of the same amount from prospective entrants into the business that could be

released after they meet their roll-out plans. It also recommended that ILD

service providers be required to pay an annual license fee at 15 per cent of the

adjusted gross revenue to the government.

Will not affect VSNL value



Mahajan said the relatively low entry fee was in proportion to the size of
investments necessary to begin offering international telephony services and

would encourage several private companies into the business and help reduce

tariffs.

Analysts had said the TRAI's recommendations were too lenient and could

affect the bidding for VSNL. "I don't think today's decision will have any

impact on VSNL's selling price," he said adding that VSNL's infrastructure

was formidable and any new entrant would take a long time to roll out the

service.

He said he did not expect more than half a dozen companies to remain in this

business over a period of time.

Mahajan said the government had also not made up its mind about allowing

other state-owned telecoms companies such as Bharat Sanchar Nigam Ltd., which

offers fixed-line telephony nearly all the country, and Mahanagar Telephone

Nigam Ltd., into the business.

The Indian government has already thrown open the mobile, fixed-line and

national long-distance telephone businesses to the private sector as part of its

drive to draw investments into the sector.

(C) Reuters Limited.