Unable to roll out services, new telcos look for exit route

The government has started working towards devising an exit route for some new telecom operators in possession of valuable spectrum but not in a position to roll out services. Among the options being considered is said to be a relaxation in the merger and acquisition (M&A) rules, to allow the firms to cash out.

It is a classic chicken an egg scenario in which the firms find themselves at not being able to attract subscribers, starved as they are of funds and having little or no experience in the field. Further given their low subscription base they do not have viable business models which has hit ability to raise funds.

The eight new entrants in the telecom sector have, between them, less than 3 per cent of the country's over 600 million current subscribers.

Official sources say, the firms are lobbying hard with the department of telecommunications (DoT) for a relaxation in M&A guidelines.

According to sources, the options on which the government is working include asking the companies to return the spectrum to the government on refund of some amount of licence fee or liberalise M& A norms to facilitate sell off.

The government would be better off with the latter case as it would then be able to impose a transaction charge, being the ultimate owner of spectrum. Analysts point out that since new operators neither have subscribers nor network, the only thing that may interest any incumbent or foreign player would be the spectrum allotted to them.