Terms and Conditions for Basic Services

Eligibility Conditions

The bidder must be a private Indian company registered under companies Act, 1956. In case of joint venture with a foreign company, foreign equity should not exceed 49% of total equity.
The bidder company must have experience of operating 500,000 telephone lines as on 1.1.1995. Experience of the foreign partner could be considered but should have a minimum stake of 10% in the total equity.
The networth of the bidder company should not be less than Rs.300 crore, Rs.200 crore and Rs.50 crore for category A, B and C circles respectively.
No company in a joint venture can be part of more than one bidder company.

Commercial Conditions

The licensee shall commission and deliver the service as per targets committed by it in the bid for a period of 12, 24 and 36 months from the date of signing agreement. The licence will be terminated for delays of more than 180 days.

Licence normally will be for a period of 15 years extendible for another 10 years at a time unless terminated earlier.

Telephone has to be provided on demand within a week during the period of licence after first 36 months.

A minimum of 10% of direct exchange lines should have to be provided to villages through PCO. Failure to do so would attract liquidated damage at a rate of Rs.66 per day of delay per village public telephone not installed.

The network of the company has to be connected to DOT network for local and STD calls between two networks as well as for STD calls to other circles and ISD calls. The private sector will not be licenced for the national and inter--circle long distance lines in the first instance. The position will be reviewed after five years.

For not meeting the committed target of 10% growth in telephone network during the first three years of the 15 year licence period would attract a penalty of Rs.11 for each day of delay per telephone not installed.

Use of indigenous equipment compared to the total equipment at the end of first three years should be 3% and failing to do so a penalty of 6% of the net present value of the total levy will be payable if the failure rate is 100%. For a failure of less than 100%, the penalty will be levied on pro--rata basis.

The number of phones out of service at any given point should be less than three per 100 phones per month. And in case the phones are faulty, 90% of them should be set right within the same working day.

Not more than 0.1% of the bills issued should be disputed over a billing cycle.

Technical Conditions

The network of the selected bidder will be required to meet technical and quality standards specified by the government.
Optical fibre and wireless are the preferred technologies for subscriber loop. Copper cables shall not be permitted except for the last 500 meters of the loop.

Financial Conditions

Tariff for the service provided by licensee shall not be more than DOT's tariff. Tariff is subject to regulation by the to--be set--up Telecom Regulatory Authority of India.
The licensee has to pay licence fee in yearly installments for the period of licence as quoted by him in the financial bid.
Financial bank guarantee and performance bank guarantee of specified amounts will be given by the licensee to the Government against due payments and adherence to licence conditions.

Criteria for Evaluating Financial Bids

A month before the deadline of submitting the bids for basic telecom service for the 21 telecom circles, the ministry of communications announced the criteria to be followed to evaluate the financial bids of prospective private operators. The weightages for the different parameters quoted in the financial bid has been fixed as follows:

72% on net present value of total levy and schedule of the payment. More weightage would be given to a bidder who quotes the highest levy and promises to pay this in the shortest period of time.
15% on the proportion of network that will be dedicated for providing public telephones in rural areas. Bidder providing the maximum number of connectivity in the rural areas, subject to a minimum of 10%, to be provided by every bidder would get a higher weightage.
10% on growth of network in the first three years.
3% on use of indigenous equipment as compared to the total equipment in the first three years.

The ministry also announced a significant change in the conditions contained in the tender document. The access charges for calls delivered into the DOT network fixed earlier at 64 paise per unit call for STD calls and 87 paise per unit call for ISD calls was reduced to 50 paise per STD and 70 paise per ISD calls. Each unit of ISD call will be charged Rs.1.40 by the private operator. This will mean that the DOT and the private operators will share the ISD call revenue in the ratio of 50:50 and in case of STD calls the ratio would be 60:40. Each unit of STD call will be charged Rs.1.25

Response

The basic telecom service bids were invited on telecom circle basis. The bids which were submitted till 23 June 1995 (the last date) indicated that 16 consortia had evinced interest for 20 telecom circles with 81 bids. Jammu and Kashmir had no bidder. Delhi and the northern state of Punjab proved to be the most sought after circles with both attracting nine bids each. Maharashtra, including Bombay as well, attracted six bids.

The financial bids were opened on 31 August 1995. Himachal Futuristics Communications Ltd. combined with Bezeq of Israel emerged has the highest bidder in all the nine telecom circles it had bidded for. The total bid amount for the nine circles aggregated Rs.85,925 crore.

Centre for Monitoring Indian Economy, Bombay
Contact Addresses for More Information
Last updated: August 1995.