Mahanagar Telephone Nigam Ltd. (MTNL), a PSU Telco based in Mumbai and Delhi has invited expressions of interest from Indian and foreign companies to run its 3G services on a franchise based agreement.
MTNL along with BSNL received 3G licenses ahead of their competitors. MTNL has so far not seen much success in the 3G arena. They have set an ambitious target of 200,000 to 300,000 users for its 3G services in the first year of operations. It has been able to garner only few hundred users for its 3G services despite getting a first mover advantage in 3G services.
3G license allocation has seen hue and cry over past few years with the matter getting delayed every now and then. Government fixed the base 3G license prices at Rs 4040 crore and is expected to go for 3G license allotment in 2009 itself.
Terms of Arrangement for bidders:
- The agreement will be on a revenue-sharing basis and the deal would imply franchisee deal for 10 years. The deal will be reviewable after the end of the three initial years.
- For a company to apply for the franchise deal, it should not be a licensed telecom service provider in Delhi or Mumbai and should not take on such licenses in Delhi or Mumbai during the term of the contract.
- The chosen companies will have to ascertain revenue of 30 crores ($6.1 million) each for the two circles, Delhi and Mumbai, in the first year. And for the second and third years, the revenue has to be between Rs 120 crore and Rs 240 crore, for Delhi and Mumbai respectively.
- The qualification criteria pertains to company servicing a total of 1 million 3G customers in at least two countries with a turnover of $30 million in the past two years.
- In the first year of the agreement, MTNL will guarantee 100,000-subscriber 3G capacity each in the Delhi and Mumbai telecom service areas, followed with 300,000 and 500,000 users for each of the two cities in the second and third year respectively.
This Franchise route taken by MTNL is particularly to avoid paying heavy 3G licensing fees as conveyed through 3G base prices and to leverage the strength of other telecom biggies to garner more users for 3G services. The franchise route in 3G services also speaks of innovation currently played out in Indian Telecom market.
The deal would also provide foreign operators to gain back door entry into Fastest growing telecom market in the world. The grave point is the hurdle Telecom operators would be facing after 3G allocation as to find huge serviceable 3G user base, in a market always perceived to be very much price-sensitive.
