Mahanagar Telephone Nigam Ltd. (MTNL), a PSU Telco based in Mumbai and Delhi has sought initial bids for franchise agreement of its Wireless Broadband services utilizing Wi-Max Technology. Earlier it invited EoI (expressions of interest) for a similar franchise route of its 3G operations.
WSJ reports that the aspired deal will be on a revenue-sharing basis akin to its previous 3G franchise agreement although very less details are available for sharing agreement of miscellaneous revenues accruing from such operations.
The recent franchise route further showcases the inability of PSU Telco’s to leverage and market new age communication products to their advantage. BSNL and MTNL were given 3G and Wi-Max Licenses ahead of their private counterparts but has largely been unsuccessful in gaining first mover advantage in 3G and Wi-Max services. MTNL reportedly had only 1000 subscribers for its 3G operations till recently.
Terms of agreement?
- The bidders should provide a performance guarantee deposit of Rs. 15 crore rupees valid for at least three years, for each of the cities.
- The last date for accepting the bids is Sept. 16 and MTNL would shortlist the final bidders Sept. 17.
- The franchisee shouldn’t be a licensed telecom service provider in Delhi or Mumbai and shouldn’t enter into any similar contract with any other telecom service provider, or hold any type of telecom licenses, in Delhi or Mumbai during the period of the contract with MTNL, it added.
- During the first year of the deal, MTNL will ensure 100,000-subscriber WiMax capacity each in the Delhi and Mumbai telecom service areas.
Many current Indian Telcos may again not qualify due to the conditional clause of no-service in implied area. The franchisee route is basically to avoid suffering hefty losses as the auction prices in metro would be higher than in other telecom circles. MTNL may also be forced to look at merger possibility with BSNL if its proposed plans go haywire. In June, BSNL too invited bids to run its WiMax services.
This types of deal that too from a PSU Telco also implies high auction prices much above base price as expected by Telcos and very low chances of making money from 3G and Wi-Max business in initial years. Government earlier fixed the Final reserve price for pan-India WiMax license at Rs 2020 crores while Base 3G auction prices where fixed at Rs. 4040 crores. Lets just ignore 4G services for now!
MTNL’s success through this franchisee route would also be seriously gauged to initiate further deals in same manner. The government at the same time should take this deal in serious perspective as the situation of 3G success may not come so easily even for other private Telecom service providers.
