No bailout to new 2G license holders until approval from finance ministry

The telecom ministry today said that the decision to bail out new mobile phone companies who are keen to surrender 2G licences along with wireless spectrum will be taken after consulting the finance ministry.

Officials from the Department of Telecommunications (DoT) said that it would consult the finance ministry only after the Telecom Commission, a decision-making body of the Telecom Ministry is able to recommend viable options.

In January 2008, the DoT, under the direct control of telecom minister A Raja's ministry had issued new pan-India telecom mobile licences and wireless spectrum to a clutch of new operators for Rs1,651 crore each.

DoT had issued eight new 2G licences including to Uninor, Sistema Shyam, Etisalat DB, Stel, and Loop Mobile. Some who have merged or are going to after completing the mandatory three-year lock-in period while some have not been able to roll-out their services due to stiff competition, which is likely to attract stiff penalties from the government or have their licences revoked.

Many of the new entrants are battling for survival as tariff wars in India's ultra-competitive mobile market have significantly lowered average revenues per customer, making their businesses unviable.

The Comptroller and Auditor General of India (CAG), the public accounts watchdog, has warned the telecommunications ministry against bailing out mobile phone companies in violation of rules.