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The Terms For Migration To A Unified License For Telecom In India

India has announced guidelines for getting a Unified License for telecom services: the Unified License combines multiple telecom services, including Access Service (Service Area-wise), Internet Services (for which there are three different categories), National Long Distance, International Long Distance, Global Mobile Personal Communication by Satellite, Public Mobile Radio Trunking Service (PMRTS)Service, VSAT, INSAT MSS-Reporting (MSS-R) Service and Resale of International Private Leased Circuit (IPLC) Services. These licenses are not linked to spectrum, which will have to be leased separately: India’s last two spectrum auctions for mobile services have been disastrous. It’s not clear as to why exactly we need licenses, when the same terms and conditions can be applicable when scarce resources (such as spectrum) are allocated, but governments need money, so we have licenses, which essentially serve as gateway fees, and sometimes, inordinately high fees for buying application forms. Frankly, instead of a new Unified License, the Universal Access Service License should just have been renamed Unified License, and it’s scope expanded.

Some terms related to the Unified License:
– Non discriminatory: there is no restriction on the number of entrants for the provision of any service in a Service Area.
– Paid up capital and Net Worth: minimum Net worth and paid-up equity shall be limited to a maximum of Rs. 25 Crore, with the paid up capital to be maintained during the tenure of the license. The networth of promoters/equity share holders shall not be counted for determining the networth of the company.
– Entry Fee: Rs 15 Crore. However, note that one can get licenses for individual services as well under the Unified License (odd as that sounds).

Unified License Fees

– License Fee:  An annual License fee as a percentage of Adjusted Gross Revenue (AGR) is applicable service-area wise, for each authorized service. At present, this is 8% of the AGR, but from the second year onwards, it shall be shall be subject to a minimum of 10% of the Entry Fee of the respective authorized service and service area, indicated in the table above.

There’s also the following condition related to presumptive AGR, which, to be honest, we couldn’t understand: “In case the Licensee obtains access spectrum for operation of any authorized service in a service area, a ‘presumptive AGR’ for that authorized service and service area shall be arrived at in accordance with the relevant provisions of the Notice Inviting Application (NIA) document of the auction of spectrum or conditions of spectrum allotment/LoI as the case may be.

The Licensee shall, in such cases, pay the license fee on the presumptive AGR or actual AGR or the minimum license fee whichever is higher.

In case, the Licensee obtains spectrum for any service and service area in different bids, the total presumptive AGR shall be the sum of the presumptive AGRs calculated on the basis of the respective Bid amounts as prescribed in the respective NIA or conditions of spectrum allotment/LoI as the case may be.”

– Equity holding in other companies: In the event of holding/obtaining Access spectrum, no licensee or its promoters, directly or indirectly, shall have any equity in another licensee company holding “Access Spectrum” in the same service area. A promoter is defined as a legal entity other than India’s Central Government, a financial institution or a scheduled bank, which hold 10% or more in the licensee company.

– Migration of licenses: If a telecom service provider wants to migrate its licenses to the Unified License, it needs to migrate all its existing licenses. Additionally, when an additional service is acquired, they’ll need to migrate to the Unified License regime. In case of M&A, the merged entity shall migrate to UL.

More importantly, “on expiry of any of their current license, the Telecom Service Providers shall have to migrate all its licenses to Unified License regime at the time of renewal/extension of license and obtain spectrum separately, which is delinked from Unified License, if required.”

Some terms related to the migration:
– Term: On migration, Unified License shall be for a period of 20 years from the effective date of UL, irrespective of the validity period of the License already held.
– Entry fee applicable to migration to Unified License shall be equal to entry fee for new Unified License except for Internet Service Provider with BWA spectrum. For migration of ISP with BWA spectrum to UL regime with authorisation of providing access services, which enables it to provide mobile voice services also using BWA spectrum, an additional fee equal to the difference between the entry fee for UASL (details) and entry fee paid for ISP license shall be payable in addition to the entry fee as applicable for new UL.

There are some terms related to rebates in the guidelines.

– Rollout obligations & penalties: After migration, roll out obligation and any other relevant liabilities including financial dues and treatment of violations and imposition of penalty thereof, if any, associated with the existing Licenses/spectrum shall remain applicable.

– Spectrum: the shift to the UL will not impact the validity of spectrum held, while the license might end up being valid for a longer period of time. The two aren’t linked.

Also read: India’s Unified License Guidelines: Roaming Pacts, Cross Ownership, Broadcast

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