Spice faces eligibility hurdle

Spice faces eligibility hurdle : DoT's Net Worth Norms May Disqualify Company For Pan-India Licence

Shalini Singh | TNN

 

New Delhi: Amid rumours that letters of intent (LoIs) for new telecom licences will be awarded early this week, Spice Telecom, which has applied for 20 Unified Access Services Licences (UASL), is facing threshold qualification issues on account of net worth problems. Spice Telecom, which is jointly owned by B K Modi and Telekom Malaysia Berhad (TM), had applied for these licences on August 31, 2006. It already operates mobile services in Karnataka and Punjab. 

   In a departure from usual practice, DoT is now only considering the net worth of the SPV Telekom Malaysia India (TMI), formed to invest in these circles, which is roughly Rs 300 crore, rather than the net worth of the parent company Telekom Malaysia, whose net worth is over $10 billion. While TM earlier held 49% in Spice, this has been reduced to 39% since Spice's recent IPO when it diluted 20% of its overall equity. Under the UASL regime, every circle requires a specific net worth to be held by the applicant or parent company, in case a special purpose vehicle (SPV) has been formed solely for application purposes. 

   The net worth is cumulatively calculated as pre-qualifying criteria before issuing LoIs, which leads to licence fee payments and finally, the grant of a UAS licence. 

   While Modi, chairman, Spice, was quick to call on the new secretary, DoT, Siddharth Behura, to sort out this nagging problem, DoT sources say Behura offered a lukewarm response. The implication of this new interpretation of net worth could be severe for Spice. "We are fully eligible to get LoIs in all 20 circles. The money is ready. This is just a ploy being used by competitors to compromise us,'' Modi told TOI. If DoT considers the net worth of Telekom Malaysia, Spice has a reasonably high chance of bagging a majority or all the circles for which it has applied. 

   The war for LoIs is becoming increasingly fierce because of the huge stakes involved. Pan-India spectrum, which is being valued in the region of Rs 14,000 crore by some appli cants, is being awarded by DoT for Rs 1,651 crore. 

   The rumour about Spice falling short on net worth has been doing rounds for a while, but things came to a head after Delhi HC refused to grant a stay on issuance of LoIs. This gives DoT the green signal to issue LoIs to as many as 22 applicants who applied on or before September 25, 2007. The spectrum tangle is becoming increasingly complex. Even at this stage, the inter se priority for new applicants (date of payment or date of application) has not been set. Spice and some others benefit from priority based on date of application given its August 2006 vintage.