In­dus­try Rec­om­men­da­tions on VNO Li­cens­ing in In­dia

Voice&Data - - SPECIAL REPORT -

Time taken to is­sue li­censes

It is un­der­stood that since the an­nounce­ments were made and Guide­lines is­sued in June 2016, nearly 70 or more ap­pli­cants have sub­mit­ted their ap­pli­ca­tions to the Depart­ment for is­suance of Li­censes. How­ever, in the en­su­ing two-and-a-half months, no Let­ter of In­tent or Li­censes have been is­sued yet. There is no clar­ity on pro­cess­ing time to is­sue Li­censes. This un­pre­dictable sit­u­a­tion is preva­lent with other ser­vices Li­censes as well, where it takes up to 6 months or more to ob­tain li­censes, thus damp­en­ing the en­thu­si­asm of en­trepreneurs to an ex­tent.

In­dus­try Rec­om­men­da­tion : Stream­line the li­cens­ing ap­pli­ca­tion process, where the Depart­ment can is­sue Li­censes in a pre­dictable time-frame, say a max­i­mum of 45 to 60 days, where the ap­pli­cants meet the con­di­tions of the ap­pli­ca­tions.

El­i­gi­bil­ity for LLP (Lim­ited Li­a­bil­ity Part­ner­ships)

Since the en­act­ment of the In­dian Com­pa­nies Act 2013, the cat­e­gory of Lim­ited Li­a­bil­ity Com­pa­nies have pro­vide Con­sti­tu­tional and Le­gal recog­ni­tion. How­ever, the el­i­gi­bil­ity con­di­tions for ob­tain­ing any ser­vices Li­cense from the Depart­ment makes it in­cum­bent upon the ap­pli­cants to be reg­is­tered as pri­vate lim­ited com­pa­nies at the bare min­i­mum, which en­tails a cer­tain higher level of fi­nan­cial com­mit­ments and le­gal com­pli­ances and bur­dens. While, the Depart­ment can and should seek ad­e­quate cap­i­tal­iza­tion re­quire­ments to en­sure that po­ten­tial new en­trepreneurs have the min­i­mum re­sources to be able to roll out their ser­vices at their re­spec­tive ser­vice area lev­els, dis­al­low­ing LLP firms is at odds with the le­gal pro­vi­sions rec­og­niz­ing them as le­git­i­mate busi­ness en­ti­ties, reg­is­tered with the re­spec­tive Reg­is­trar of Com­pa­nies.

In­dus­try Rec­om­men­da­tion : Clar­ify, by is­su­ing amend­ments to the Li­censes (un­less specif­i­cally war­ranted oth­er­wise with sub­stan­tial rea­sons), that Lim­ited Li­a­bil­ity Part­ner­ships, reg­is­tered with the re­spec­tive RoCs are el­i­gi­ble to ap­ply for the Li­censes, sub­ject of course to all other fi­nan­cial com­pli­ance and re­port­ing norms as laid down by the DoT and TRAI.

FDI un­der au­to­matic route

For­eign Di­rect In­vest­ment in the UL-VNO ser­vices has been per­mit­ted at 49% un­der the Au­to­matic Route. Any FDI over and above 49% has to be ap­proved on a case-to-case ba­sis.

Con­sid­er­ing that there are ap­prox­i­mately 1,000+ suc­cess­ful VNOs around the world, who may be po­ten­tially in­ter­ested to in­vest in the In­dian mar­ket, a more lib­er­al­ized au­to­matic FDI route would be an at­trac­tive propo­si­tion.

The cen­tral govern­ment has this year taken ma­jor pol­icy ini­tia­tives un­der the Make in In­dia frame­work, to lib­er­al­ize for­eign in­vest­ment, such as in­ter alia al­low­ing up to 100% FDI un­der the Au­to­matic route for sec­tors such as Broadcasting Car­riage ser­vices, Tele­ports, DTH, Ca­ble Net­works Mo­bile TV, HITS, Broad­cast Con­tent Ser­vices, Uplink­ing and Down­link­ing of cer­tain types of TV Chan­nels, etc.

In­dus­try Rec­om­men­da­tion : Con­sider pro­vi­sion of up to100% FDI un­der the au­to­matic route for the VNO Li­censes, con­sid­er­ing that VNOs are by large ex­ten­sion of or re­selling arms of Tele­com Op­er­a­tors, who in any case com­ply with the ex­tant FDI norms. DoT may make this rec­om­men­da­tion to the DIPP for ap­pro­pri­ate ac­tion.

8% (1st year) & 10% there­after li­cense fee/ rev­enue share

By far, the strong­est sen­ti­ments were re­ceived against the im­po­si­tion of 8% Li­cense Fee on the VNO op­er­a­tors. While the Tele­com Op­er­a­tors al­ready pay 8% Li­cense fee/rev­enue share of their AGR, im­pos­ing a sim­i­lar 8% Li­cense Fee on their down­stream chan­nel part­ners (as the VNOs are) is tan­ta­mount to a dou­ble levy with­out any off­set­ting re­lief.

The VNOs will es­sen­tially lease out net­work ca­pac­ity from the TSPs and 8% Li­cense Fee/Rev­enue share would al­ready be fac­tored into the bulk costs at which VNOs would then lease those fa­cil­i­ties from the re­spec­tive TSPs. In­cre­men­tal rev­enues at very thin mar­gins would likely be earned by the VNOs, but these thin mar­gins too would be neg­a­tively im­pacted with­out any off­set­ting of the in­put costs.

In­dus­try Rec­om­men­da­tion : Re­con­sider the im­po­si­tion of the 8% Li­cense fee on VNO op­er­a­tors, in or­der to en­sure busi­ness vi­a­bil­ity of the VNOs. The op­tions to be con­sid­ered may be to re­move the 8% Li-

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