DoT proposes tax breaks for 3G winners

26 Aug 2009, 0044 hrs IST, Kalyan Parbat & Joji Thomas Philip, ET Bureau at http://economictimes.indiatimes.com/DoT-proposes-tax-breaks-for-3G-winners/articleshow/4934677.cms.

KOLKATA: The Department of Telecommunications (DoT) will ask the empowered group of ministers (EGoM) on 3G-spectrum auction, headed by Finance minister Pranab Mukherjee, to consider a proposal under which successful bidders of pan-India 3G spectrum can enjoy tax benefits applicable under section 80-1A of the Income Tax Act.

The DoT’s rationale is that the 3G mobile broadband should be treated as a distinct infrastructure service and not continuity of telecom operations, especially in case of 2G service providers pitching for a pan-India 3G licence. The DoT will place the proposal during the second meeting of the EGoM scheduled for Thursday.

The proposal for tax benefits applicable under section 80-1A of the Income Tax Act is part of an internal note prepared by DoT that will be circulated to EGoM members, a senior DoT official told ET.

Currently, only telecom companies that kicked off operations between April 1, 1995 and March 31, 2000 enjoy income tax breaks under section 80-1A. If the EGoM were to accept the DoT proposal, it would imply that 3G operations of telecom companies will enjoy income tax breaks on 100% of their profits for initial five years. In the next five years, these telcos will enjoy a 30% tax break on their profits.

The DoT note to the EGoM also adds that Indian Space Research Organisation (ISRO) is of the view that it cannot spare any further airwaves for WiMax services. As reported by ET earlier this month, ISRO chief G Madhavan Nair had said that the Department of Space (DoS) has already parted with 40 MHz of airwaves for WiMax services in the 2.5 GHz band.

He said any interference from the WiMax services offered in this band in the future could “severely affect the very sensitive satellite services in the adjacent band”. Mr Nair had also added the DoS is now left with only 150 MHz of airwaves in the 2.5 GHz band, the bare minimum requirement for satellite services.

The DoT note to the EGoM was prepared by its joint secretary (T) and consists of demands from the industry, especially those of CDMA-based operators, and includes the views of the DoS on WiMax spectrum.

The EGoM is slated to settle all outstanding issues associated with the auction of 3G airwaves, vital for high-end services such as high-speed internet and video conferencing on mobiles.

It will take a final call on the reserve price for 3G and WiMAX spectrums and decide on the number of players to be allowed to offer these high-end services in each circle.

It is also learnt that the EGoM may also debate whether the government at all has the right to urge successful bidders of 3G spectrum to shell out an extra Rs 1,600 crore-plus for a separate pan-India UAS licence, especially when DoT knows only too well that there is no extra 4.4 MHz 2G spectrum available to bundle with new licences.

“At a time when the DoT’s wireless planning cell is well aware that it won’t be able to meet future 2G spectrum obligation for new UASL licencees, why should they be asked to shell out an extra Rs 1,600 crore plus full complement of the licence fees. While nothing has been finalised yet, a successful bidder of 3G spectrum, alternately, may also be asked to shell out a lower sum for a pure vanilla UASL without the bundled spectrum,” said a government official familiar with the matter.

Indications are that a section of E-GoM members are loathe to the idea of fixing the number of slots for 3G services to a maximum five (including BSNL) per service area. “Considering that, there are as many 11 to 9 slots available in some circles like Orissa and Madhya Pradesh, the E-GoM is likely to debate the rationale of uniformly restricting the number of slots (per circle) for delivery of 3G services. There is a feeling in the finance ministry that such restriction can tantamount to a loss of potential revenue for the government,” said a DoT official close to the developments.

Mittal, MTN chief meet Pranab, Khurshid to discuss merger

On 25 Aug 2009, 0720 hrs IST, ET Bureau at http://economictimes.indiatimes.com/Mittal-MTN-chief-meet-Pranab-Khurshid-to-discuss-merger/articleshow/4931103.cms

NEW DELHI: Bharti group chairman Sunil Mittal and South African company MTN’s chief executive Phuthuma Nhleko met finance minister Pranab Mukherjee and minister of state for corporate affairs Salman Khurshid on Monday, triggering speculation about the motive for the meeting days after the merger partners extended exclusive talks for their proposed $23-billion deal.

The meeting with the finance minister comes just three days after both the telcos extended their exclusive merger talks by another month to September-end.

Mr Khurshid said the meeting was just a courtesy call by the honchos to appraise the ministry on the merger talks. Terming the proposed deal as a very big opportunity for the country, he said: “They are in touch with the regulators and the finance ministry. Our (ministry of corporate affairs) role comes at a later stage.”

The nature of the discussions with Mr Mukherjee was not disclosed and both Mr Mittal and Mr Nhleko could not be contacted on this issue. Mr Mukherjee was not available for comments. Officials at the ministry, too, declined to disclose the agenda for the meeting.

The largest telcos in India and Africa have been involved in exclusive talks for close to three months to create the world’s third-largest communications firm. The deal’s contours present a complex structure in which both firms would pay cash and equity for stakes in each other. If the deal goes through, Bharti Airtel will get 49% in MTN and the South African telco and its shareholders will get 36% economic interest in Bharti.

Industry analysts say the most probable reason for the highest ranking executives from both the companies meeting the finance minister could be related to the country’s foreign investment cap of 74% in telecom firms. It is also possible that Mr Mittal and Mr Nhleko could have updated the finance minister on the talks between the companies.
The new FDI norms consider a company Indian if Indian promoters hold a majority stake in it and the investments made by such companies in any joint venture or downstream venture will be treated as Indian.

Bharti Airtel, which had close to 70% foreign equity as per the old guidelines, has only about 43% FDI under the new norms. This is because a significant part of the Singapore-based telco SingTel’s 31% holding in the company as well as Vodafone’s entire holdings are routed through majority-owned Indian companies. Even after the deal, the emerging entity will, therefore, have FDI within the prescribed limit.

Despite this, approval from Indian regulators and the government may still turn out to be a tricky issue. RBI has asked the department of economic affairs under the finance ministry to review the new FDI guidelines. Any changes in the FDI norms could force both the companies to restructure the deal. Besides, the foreign investment promotion board, the apex body that clears foreign investments, has not cleared any proposals so far under the new norms due to opposition from the finance ministry.

Analysts, therefore, speculate that the honchos may have sought clarity from Mr Mukherjee regarding the government’s position on the new FDI norms. They feel that the meeting with Mr Khurshid could be related to Bharti’s plans to issue GDRs to MTN shareholders.

The Indian telco’s equity expansion will only be in the form of GDRs that will be listed on the Johannesburg Stock Exchange. This means, MTN’s proposed 36% holding in Bharti Airtel — 25% with the company and the rest with its shareholders — would be in the form of GDRs listed on JSE.

All regulations related to GDRs are governed by the ministry of corporate affairs. Post the deal, both the telcos will have to get a formal approval from markets regulator Sebi, exempting the South African firm from making an open offer for an additional 20% in the Indian company.

The Hindu Business Line : I&B Ministry moots five-year tax break for digital TV services

via The Hindu Business Line : I&B Ministry moots five-year tax break for digital TV services on June 19, 2009

Our Bureau

New Delhi, June 18 The Ministry of Information and Broadcasting has suggested a five-year tax holiday for those offering digital television services.

The Minister, Ms Ambika Soni, met the Minister of Finance, Mr Pranab Mukherjee, with the I&B’s budget proposals.

The Ministry is suggesting the tax holiday for digital cable, direct to home, satellite-based cable Headend in the Sky (HITS) and similar service providers distributing digital content. They could be taxed for 30 per cent of their profits for the following five assessment years in a block of 15 years, suggest the Ministry.

The Ministry has also asked for the fringe benefit tax (FBT), currently at 20 per cent, to be reduced to five per cent for both print and electronic media, and an exemption from FBT for the film industry.

Service tax of around, 12 per cent, applicable on advertising revenue of television broadcasters should also be exempt,

Ms Soni told Mr Mukherjee, bringing them at par with the print media which enjoys this exemption.

For newspapers, the I&B Ministry would like the government to waive the levy of service tax on road and rail haulage for imported newsprint.

Ms Soni has also asked service tax, entertainment tax and value added tax to be replaced by unified single Goods and Servi

Bharti rules out foreign investment in DTH biz

18 Jun 2009, 0124 hrs IST, Rashmi Pratap, ET Bureau

MUMBAI: Bharti Airtel, India’s largest telecom operator, said that its direct-to-home (DTH) venture, Bharti Telemedia does not require the approval of the Foreign Investment Board (FIPB), as the investment has come from Bharti Airtel’s internal accruals.

Responding to questions raised by FIPB regarding foreign investments in Bharti Telemedia, the company said there is no cash flow or investment from any foreign entity into Telemedia either directly or through Airtel.

In a letter to FIPB, Telemedia said FDI investment into Airtel has been in accordance with the norms and cap in the telecom sector and duly approved by FIPB. “Further, there is no FDI investor who has invested in Airtel specifically for downstream investment in the DTH sector. Accordingly, Bharti Telemedia did not apply for FIPB approval as it was not seeking fresh FDI or overseas investment,” it added.

This communication has come in response to a query from FIPB, which said approval for Bharti’s DTH services was “subject to compounding” (confirmation) by the Reserve Bank of India. Bharti said that “compounding” was not applicable in this case as only Indian money has been invested in Telemedia and no foreign money was routed to the company.

The government had earlier said the shareholding structure provided by Bharti Telemedia did not have FIPB approval and this was not in accordance with existing FDI policy. Last year, the Information & Broadcasting Ministry had also raised questions about Bharti Telemedia not having FIPB approval for foreign investments coming into it on a pro-rata basis through investing firms, including Airtel.

According to the FDI guidelines for DTH, total foreign equity holding in a company should not exceed 49% and the FDI component within the foreign equity should not exceed 20%. Airtel has 40% stake in Bharti Telemedia, while the remaining is held by an “Indian company of the Bharti group”, a Bharti spokesperson said.

Bharti also pointed out to FIPB that under the revised FDI policy, as per Press Notes 2 and 4, announced in February this year, Airtel qualifies as a company “owned and controlled” by resident Indians and there is no indirect FDI into Telemedia through Airtel.

Under the revised Press Notes, a company is considered Indian if Indian promoters have a stake of at least 51%. Moreover, the investments made by such companies in any joint venture or downstream venture will be treated as Indian. Since a major part of SingTel’s 31% stake and Vodafone’s over 4% share in Airtel is routed through majority-owned Indian companies, Airtel is owned and controlled by Indians.

Airtel launched its DTH services in October last year. It competes with Tata Sky, Reliance Communications’ Big TV, Zee’s Dish TV and Sun Direct in this segment. The company hasn’t yet started disclosing revenues from DTH services separately. “We will start disclosing the operational and financial performance of DTH operations next year, once they become material,” Airtel CEO and joint MD Manoj Kohli said recently.

The Hindu Business Line : Import of mobile handsets without IMEI number banned

via The Hindu Business Line : Import of mobile handsets without IMEI number banned.

Huge impact on grey market phones.

Our Bureau

New Delhi, June 17 In a move that could signal the end of grey market mobile phones, the Government on Wednesday banned import of all handsets without the International Mobile Equipment Identity (IMEI) number.

IMEI is a unique 15-digit code that identifies a mobile. It prevents the use of stolen handsets for making calls and allows security agencies to track down a specific user. However, a majority of handsets sold in the grey market do not come with the IMEI, which has is of concern for security agencies.

The Government move to ban handsets without the code will hit a number of Chinese and Taiwanese manufacturers that were flooding cheap handsets in the grey market. The move will have no impact on the 25 million cellular users who already have bought a handset without IMEI. The ban is applicable only on new handsets being imported into the country.

The Director-General of Foreign Trade issued the notification on Wednesday imposing the ban with immediate effect.

Welcoming the decision, Mr Pankaj Mohindroo, President, Indian Cellular Association, said, “This is a step in the right direction to throttle handset grey market. However, much more needs to be done to tackle this menace. We are working with the Government in this regard.”

To protect consumers who have already bought handsets without the IMEI number, the Cellular Operators Association of India has tied up with Mobile Standard Alliance of India to set up 1,600 retail outlets across the country to provide the IMEI number on handsets without one. It is estimated that there are 25 million subscribers across the country using handsets without the IMEI number. Concerned over the national security, the Department of Telecom had earlier asked operators to disconnect services to handsets that do not have the IMEI number by April 15. However, the COAI, representing the GSM industry, has developed a software that will provide the unique number to instruments that do not have it.

The solution is being implemented with the approval of the DoT and the security agencies. Subscribers who do not avail themselves of this facility will be disconnected by the operators after June 30.

Related stories at

• http://efytimes.com/efytimes/fullnewsxml.asp?edid=35220
• http://www.ciol.com/technology/mobility/news-reports/india-bans-mobile-handsets-without-imei/18609121163/0/
• http://timesofindia.indiatimes.com/India/Govt-bans-import-of-Chinese-mobiles/articleshow/4668458.cms

BSNL’s GSM project faces further delay

Thomas K Thomas on The Hindu Business Line on June 15, 2009

New Delhi, June 15 Finnish telecom equipment-maker Nokia Siemens Networks (NSN) has shot off a fresh letter to Bharat Sanchar Nigam Ltd’s two-member integrity panel alleging that it has been unfairly singled out of the bidding process for the Rs 30,000- crore GSM project.

NSN has alleged some of the other bidders had also not produced certificates required to be eligible for the tender.

The panel is investigating whether the tendering process was transparent or not. BSNL will not award the contracts till the investigations are complete.

Experience certificate

The Punjab and Haryana High Court had directed BSNL to give the reasons in writing. According to BSNL sources, NSN had not submitted an experience certificate for the North zone. However, NSN countered it on the ground that the certificate submitted for other zones was relevant for the North zone as well. NSN said in its letter that if BSNL had to disqualify its bid, then the PSU should have also rejected Ericsson’s bid since the latter had allegedly not given a separate certificate for 2G equipment, though BSNL had floated different tenders for 2G and 3G equipment.

BSNL had referred the dispute to an integrity panel approved by the Central Vigilance Commissioner after NSN took its case to the CVC seeking intervention. Two former Chief Election Commissioners — Mr T.S. Krishnamurthy and Mr B.B. Tandon — are the members on this panel. Ericsson and Huawei were short-listed by BSNL, which had rejected offers from NSN, Alcatel Lucent and ZTE.

MTN may take GDR route for 25% stake in Bharti Airtel

15 Jun 2009, 0014 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: South African telecom major MTN’s proposed 25% stake in Bharti Airtel will be through global depository receipts (GDRs), if the plans by the two companies to mutually acquire equity to form a global cellular alliance stretching from the Cape of Good Hope to the Indian Ocean goes through.

A top Airtel executive involved in talks with MTN told ET that the GDRs will be listed on the Johannesburg Stock Exchange, shedding more light into the complex nature of the deal, which is set to test the new foreign direct investment (FDI) norms earlier this year.

This puts to rest all speculation regarding the deal and implies that the entire equity expansion of Bharti Airtel will be in the form of GDRs issued to MTN and its shareholders. According to the existing plan, MTN will buy a 25% stake in Bharti, while another 11% will be held directly by MTN shareholders.

Bharti, in turn, will acquire a 49% stake in MTN through a complex stock-and-cash deal. The size of the deal is estimated to be worth over $23 billion and both companies had agreed to hold exclusive talks with each other till July 31, 2009. The new company will have revenues of about $20 billion and over 200 million subscribers.

The GDR route scotches the speculation about Bharti Telecom, the unlisted holding company of Bharti Airtel, issuing fresh equity to MTN to give the South African telco a 25% economic interest in India’s largest mobile company. Bharti Telecom holds 45.3% stake in Bharti Airtel, and it was assumed that the deal would see MTN taking about 10% stake at Bharti Telecom with the issue of new shares to MTN.

Additionally, along with a stake in Bharti Airtel’s holding company, it was assumed that MTN and its shareholders would also be offered a combination of equity shares, convertible instruments, warrants at Bharti Airtel under a Scheme of Arrangement. Another model that was speculated about involved Bharti and its promoters including SingTel floating a special purpose vehicle (76:24 or 51:49) for the deal.

The new foreign holding norms give enough headroom for Bharti to route MTN’s entire holdings in it through GDRs on an expanded equity base. This is because, new FDI norms, notified under Press Notes 2, 3 and 4 by the previous UPA government, considers a company Indian-owned if Indian promoters hold a majority stake in it, and the investments made by such companies in any JV or downstream venture are also treated as Indian.

Hence Bharti Airtel, which had close to 70% foreign equity stake as per the old guidelines — where ‘beneficial ownership’ is interpreted to include indirect holding — has only close to 43% FDI under the new norms. This is because a significant part of SingTel’s 31% holding in Bharti Airtel as well as Vodafone’s entire stake are routed through majority-owned Indian companies.

Related stories at

• http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=RSSFeed-Business&id=a45dfe22-9c89-4875-90fd-8b05cd3cbde8&Headline=MTN+may+take+Bharti+stake+through+GDRs

PwC, E&Y among 8 shortlisted consultants by BSNL

11 Jun 2009, 1931 hrs IST, PTI on www.economictimes.com

NEW DELHI: State-run BSNL has shortlisted eight consultants, including Ernst & Young, McKinsey, KPMG and PriceWaterHouseCoopers, for its plans of mergers and acquisition, strategic partnerships and overseas forays.

A BSNL official told PTI it has also empaneled British Tele Consults, Value Partners, PRPM Consults and Diamond Management and Technology Consultants.

The official said PwC has furnished a certificate to BSNL saying it has not been barred to deal with any PSU and BSNL, if found later so, it can terminate the services of PwC.

These consultants will have to enter into an agreement with BSNL by tomorrow. Each time BSNL undertakes an overseas initiative, these eight firms will be asked to quote their commission price and the the lowest bider will be selected for that particular job, the official said.

The official said the PSU is looking at Africa as an area of focus as it is an emerging region and also culturally, financially, African countries suits more to India firms.

The state-run firm, which so far concentrated only on the Indian market (except Delhi and Mumbai), has decided to expand overseas. Sources said BSNL has a cash surplus of over 10 billion dollars and would use part of these resources for its overseas foray.

Vodafone’s towering plans stuck

9 Jun 2009, 0019 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: Vodafone Essar’s plan to hive off its signal towers and telecom network-related infrastructure arm to companies in Mauritius has run into rough weather for the second time after a government agency flagged the vexed issue of using a tax haven for such deals.

The Department of International Taxation (DIT) in Mumbai, the government agency that examines cross-border deals, has said in its interim report that the Vodafone Essar plan seeks to route funds in a way to take advantage of the India–Mauritius Double Taxation  Avoidance Agreement (DTAA).

According to the provisions of DTAA, Mauritius-based entities are exempt from paying capital gains tax in both countries.

After DIT’s interim report, the Foreign Investment Promotion Board (FIPB) has yet again deferred Vodafone Essar’s proposal on Ortus Infratel and Holdings.

This is the second time a government agency has opposed Vodafone Essar’s plan. In April, the revenue department under the finance ministry had said the proposed investment in the new company through Mauritius would result in ‘round tripping’.

The revenue department had referred the matter to DIT, which has again stated in its interim report that ‘the possibility of round tripping cannot be eliminated’.

In response to a detailed query sent by ET, Vodafone said the company cannot comment on the observations of either DIT or the revenue department.

In its interim report to FIPB, DIT has said the two Mauritius entities were mere holding companies with a share capital of just $100. It added that the telco has not furnished the source of funds for both Vodafone Tower and Essar Infratel despite repeated reminders. But a person close to Vodafone Essar, who wished to remain anonymous, said the source of funds for both these companies have been provided to DIT.

TRAI plans online consumer grievance redress mechanism

Thomas K Thomas  on The Hindu Buisiness Line on June 5, 2009

New Delhi, June 4 The Telecom Regulatory Authority of India is working on an online consumer grievance redress platform that will enable subscribers to lodge their complaints against any service provider through the Internet or an SMS.

The platform will automatically direct the grievance to the particular service provider after which the regulator will set a time for resolution of the problem.

Speaking to Business Line, the new TRAI Chairman , Mr J. S. Sarma, said, “The regulator needs to be seen as being effective in addressing consumer-related issues. As of now, there seems to be no real platform where consumers can voice their grievances and be assured of redress. We are looking at setting up an online mechanism that will make it easier for subscribers to get their problems addressed. This will also allow us to keep us track of the status of the grievances.”

Before taking charge at TRAI, Mr Sarma was Chairman of the Telecom Commission and then a Member of the Telecom Dispute Settlement Appellate Tribunal (TDSAT).

Quality of services

Mr Sarma said that improving quality of services is on the agenda.

“We are exploring the option of putting out the results of our quality of services survey in the form of advertisements in newspapers so that consumers are aware. This will certainly have an impact and in the competitive environment, the operators will try to improve. We are exploring this idea.”

The new TRAI chief said that his primary objective would be to make regulations conducive for sustained growth in the telecom sector.

“There are various surveys that project that mobile subscriber base will continue to grow and there are others which say that the growth story is going to stagnate. I want to focus on making sure that there is no ambiguity on this issue and make sure that the growth story continues,” Mr Sarma said.

DoT looks for new auditor for Tata Tele

The Hindu Business Line on June 5, 2009

New Delhi, June 4 The Department of Telecom has decided to change the auditor appointed to examine the account books of Tata Teleservices.

The auditor was appointed to check if the company was paying all the fees and levies as per DoT norms.

The auditor is being changed after it was declared by the company that there was an existing relationship with Tata Group as a consultant.

DoT has sought a fresh list of approved accountants from the Comptroller and Auditor General.