PSUs oppose move for telecom JV to take on DoT

PSUs oppose move for telecom JV to take on DoT
DEVSAGAR SINGH

JUNE 30: The Prime Minister's Office (PMO) has mooted a proposal to set up a joint venture telecom company to give stiff competition to the Department of Telecommunications (DoT) in fibre optic cable network in the country. But even before the proposal got off the ground, it has hit a roadblock with the state-owned PSUs and government departments opposing it on the ground that they would be adversely affected in their effort to diversify their operations into money-spinning ventures.

According to the PMO proposal, all government organisations including the railways, surface transport department owning national highways and central power utilities like National Power Grid Corporation and Gail will be required to give up their individual telecom ventures by teaming up collectively and find a strategic private partner from the telecom business to form the joint venture.

These government entities have gone ahead to enter the lucrative telecom market by utilising the right of way (ROW) they command nationwide for setting up a fibre optic cable network. The most extensive ROW is possessed by the Railways, comprising of about 63,000 route-kms of railway track and about 7000 railway stations.

Apart from the Railways, the ministry of surface transport has ROW along the national highways. Similarly, central power utilities like the PowerGrid and the electricity boards have ROW along their power transmission lines. Gail also has the right of way along its pipelines.

As per the PMO proposal, the individual government entities will only fritter away their scarce resources without being able to give tough competition to DTS in the telecom business. If they combine, on the other hand, and form a joint venture they would be in a better position to compete.

The proposal envisages that the equity structure of the joint venture should provide 49 per cent equity to the strategic private partner and the remaining 51 per cent should be held by the ministry of railways, ministry of power, ministry of petroleum and natural gas, interested state governments or PSUs under these ministries and governments.

The division of 51 per cent equity among these entities can be worked out on the basis of an independent valuation of the ROW to be made available by each one of them on long-term lease to the JV.

The fibre optic network created by the JV should be used for national long distance data transmission immediately and for national long distance voice transmission as soon as this sector is opened up. The JV may also function as a premiere internet service provider.

Further, as and when the VSNL monopoly on international service is broken up, the JV may also be the competitor to VSNL for providing international connectivity.

All regional cellular and basic service licensees may have the option to buy bandwidth from the JV according to their requirement, according to the proposal. Also, the JV will be so structured as to provide maximum managerial and financial autonomy to its management.

Significantly, the proposal makes it clear that the government entities involved in the JV will divest their equity holding in a phased manner in the next five years to reduce the government holding to 26 per cent.