Industry Recommendations on VNO Licensing in India
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-