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State-owned telecom firms cannot bid for new mobile licences

Indian telecom giants BSNL, MTNL and VSNL cannot bid for the fourth cellular operator licences being auctioned by the government on grounds that state-run firms cannot compete with each other, a government official said on Tuesday.

India's mobile market is made up of 21 circles or zones that include four metros and 17 circles categorised as A, B and C circles depending on subscriber potential.

The circles currently have two private operators each, while BSNL and MTNL are the third operators.

The government has kicked off the process for auctioning the fourth cellular operator licences and is expected to award them by the end of August. Aspirants have until the end of May to purchase application forms to bid for these licences.

"Any promoter cannot have two companies operating in the same area. This principle applies both for the government and private companies," a telecoms ministry official, who declined to be identified, said.

"For instance, Reliance cannot have two cellular firms in the same area. By the same token, no two government-promoted companies can offer services in the same area," the official said.

The government had earlier rejected bids of the three companies for fixed-line licences citing the same reason.

Though the government's decision is unlikely to hurt MTNL and BSNL in a big way as they already hold mobile licences, it could affect the plans of VSNL which has been looking to diversify out of its mainstay international calls business.

Videsh Sanchar Nigam Ltd, a monopoly overseas telecommunications provider and India's largest Internet access provider, had considered applying for some fourth cellular licences in a bid to diversify its revenue streams.

The New York Stock Exchange listed VSNL, which will be privatised by the government this year, is due to lose its monopoly over the international calls business by April 2002 which accounts for nearly 90 per cent of its revenues.

The government plans to bring down its stake in VSNL to 26 per cent from 52.97 per cent now by selling 25 per cent to a strategic partner and another 1.97 per cent to VSNL's employees.

VSNL's shares fell slightly, slipping from positive territory, to trade 0.1 per cent lower at Rs 346.25 after the news.

State-run Mahanagar Telephone Nigam Ltd, which offers fixed-line telephone services in Bombay and New Delhi, has recently started cellular services in the two cities where it is the third operator.

Analysts had expected the company to extend its cellular services to Madras and Calcutta, which would help it have a presence in the four metros.

MTNL's shares were down 2.76 per cent at Rs 151.50.

State-owned unlisted Bharat Sanchar Nigam Ltd, the largest fixed-line telephone company and India's only national long distance operator, is the least affected as it already has licences to roll out cellular services across the country.

The firm could have bid for only two licences for Bombay and New Delhi.

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