Draft Response on Exit Policy for various telecom licenses

1. The Department of Telecommunications (DoT), vide its letter dated

10th October 2011, had requested TRAI to recommend an exit policy for
the licensees who desire to exit from the provisioning of telecom services
covered under a licence.
2. TRAI vide its letter dated 03rd November, 2011 intimated DoT that
being a new reference, the Authority would need to carry out a
consultation with the stake holders and that the recommendations on
this subject will be sent in due course to the Government.
3. In order to initiate the consultation process, TRAI, vide its letter
dated 16th Dec, 2011, requested DoT to intimate the categories of the
license holders for whom the exit policy is required to be formulated.
4. In response, the DoT, vide its letter dated 23rd December 2011
requested TRAI to formulate the exit policy for all types of licences
(Annexure I).

5. Accordingly, TRAI issued a pre-consultation paper on ‘Exit-Policy

for various telecom licences’ on 6th January 2012. Comments/views from
all the stakeholders were solicited on issues like implications, advantages
& disadvantages, to the individual licensees, to the Government revenues
and to the telecom sector as a whole. The last date of receipt of
comments was 16th January, 2012 which was later extended to 24th
January, 2012.

6. On the issue whether partial exit (surrender of spectrum only in

part or complete) from business should be allowed, most stakeholders
favoured that partial exit may be permitted, that operator should be
provided with a choice to exit from circle of its choice and that option
should be given to the operator to surrender of spectrum either in full or
in part. Some of the stakeholders mentioned that partial exit may be
allowed beyond the contracted limit of spectrum. One stakeholder
suggested that since contracted spectrum (6.2 MHz( GSM) and 5 MHz of

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CDMA) comes bundled with license, partial exit may be allowed beyond
these limits. However, if the Government wants to charge beyond initial
spectrum of 4.4 MHz (GSM) and 2.5 MHz CDMA), partial exit beyond
these limits should also be allowed. One stakeholder suggested that
there may be a situation where a telecom service provider wishes to
surrender the entire allocated wireless spectrum but wishes to retain the
Unified Access Service License for the desired service area. In such a
case the licensee should be charged in line with NLD and ILD licenses
keeping minimum amount of entry fee @ Rs. 2.5 crore for pan India. The
balance amount of entry fee should be refunded back to the licensee on
pro-rata basis. Regarding the issue of refund of entry fee, majority of the
stakeholders favoured refund of entry fee on pro-rata basis.

7. On the issue of refund of entry fee, several stakeholders favoured

refund of entry fee on pro-rata basis subject to fulfillment of license
condition. It was mentioned that an operator may be allowed to exit from
telecom business after giving adequate notice to subscribers to ensure
non-disruption of service and Clearing of all outstanding dues of the
Government with regard to licence fee, spectrum charge and penalties in
case of non-fulfillment of roll-out obligation and dues of other telecom
operators with regard to interconnection.

8. Some of the stakeholders suggested that the amount of refund of

entry fee may vary depending on the status of spectrum allocation to the
licensee.

9. On the issue of release of bank guarantee, majority of the

stakeholders suggested that the bank guarantee may be released once
the departing operator clears all outstanding dues and pays all penalties
and in case the operator has not fulfilled the required rollout obligations,
a certain percentage of PBG may be deducted. However, one stakeholder
suggested that as the spectrum came bundled with license, there should
be no refund of both entry fee and any of the bank guarantees.

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10. Regarding the issue of time frame for exit from the business, the
stakeholders suggested a time frame between 2-12 months from the date
when the licensor allows the Exit from the business. It is also suggested
that there should not be a bar for re-entry in the business for such
licensees.

11. All the licenses carry clauses for non-refundable entry fee. The
relevant portion from the various license is given at Annexure-II.
Further, various telecom licenses already have provision for surrender of
licenses. Summary of relevant license conditions in different licenses in
this regard is kept at Annexure-III. The relevant condition taken from
UAS Licence, as an illustration, is as follows:-

LICENSEE may surrender the LICENSE, by giving notice of at least

60 Calendar days in advance. In that case it shall also notify all its
customer of consequential withdrawal of SERVICE by sending a 30
Calendar days notice to each of them. The LICENSEE shall pay all
fees payable by it till the date on which the surrender of the
LICENSE becomes effective. The effective date of surrender of
License will be 60 Calendar days counted from the date of receipt of
such notice by the licensor.

It shall be the responsibility of the LICENSEE to maintain the Quality

of Service even during the period when notice for surrender of
LICENCE is pending and if the Quality of Service is not maintained
during the said notice period, it shall be treated as material breach
liable for termination at risk and consequent of the licensee.

However, in case of ISP license the surrender of license condition

states that:

10.9 TERMINATION FOR CONVENIENCE: If the LICENSEE desires

to surrender the licence, it shall give an advance notice of 30 days
to the Licensor to this effect. If the service is in operation, the
licensee shall also intimate its subscribers of consequential
withdrawal of service by serving a 15 days notice to them. The
financial liability of the licensee company for termination of the
licence for convenience shall be as below:-

1. After start of service:- No surrender charge is payable.

However, if during the notice period, acceptable level of service is not
delivered to the customer, the licensee shall forfeit all claims on the

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 Performance Bank Guarantee which shall be encashed and the
amount shall be adjusted towards damages.

2. Before start of service:- The licensee who have completed the

allocated period to roll out Internet services counted from the date of
issue of the ISP license and have not yet rolled out their services
have option to surrender the license paying 5% of PBG as surrender
charge within six months of such notification. Further the licensee
who has not completed the allocated period to roll out Internet
services counted from the date of issue of the ISP license and want
to surrender ISP licenses may be permitted to do so within six
months form date of such notification by paying 2.5% of PBG as
surrender charges.

12. In view of the foregoing discussion, it can be said that as per

licence terms and conditions of the various telecom services, there is
already a provision for the licensee to surrender the licence by giving a
prior notice. The notice period is 60 days in most of the licences.
However, the entry fee paid by the operator is non-refundable and there
is no provision in any of the licence agreements, for any refunds.
Therefore, framing of exit policy for various telecom licences essentially
involves the issue of full or partial refund of the entry fee and bank
guarantees.

13. On 2nd February 2012, the Hon’ble Supreme Court in a judgment

on petition no. 423/2010 (CPIL Vs. Union of India and Ors.) and petition
no. 10 of 2011 (Dr. Subramanian Swamy Vs. and Ors.) has inter-alia
ordered:

“(i) The licenses granted to the private respondents on or after

10.1.2008 pursuant to two press releases issued on 10.1.2008
and subsequent allocation of spectrum to the licensees are
declared illegal and are quashed.

(ii) The above direction shall become operative after four months.”

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14. In the current context, therefore, there are four different categories
of licences, for which the Exit Policy was proposed to be formulated.
These are as below:

a) 122 UAS licenses given on or after 10.01.2008

b) Basic/CMTS/UASL given prior to 10.01.2008
c) All other licenses like NLD, ILD, ISP etc.
d) Future licenses.

15. With reference to various category of licenses mentioned in para 14

above, it may be noted that regarding the licenses listed under Category
(a), as per the judgment of the Hon’ble Supreme Court, they stand
cancelled after four months of the date of judgement. Therefore there is
no need for any Exit Policy in respect of these UAS Licensees.

16. In so far as licenses falling under category (b) are concerned, in

view of the fact that these Licensees are operational for a number of
years and have substantial network and subscribers, there seems to be
no requirement for an exit policy for them.

17. Regarding licenses like NLD, ILD, ISP etc. falling under category
(c), most of these licenses carry low entry fee and the licensee has an
option to surrender its licence at any time subject to certain license
conditions. Therefore, there seems to be no need for separate exit policy
for such licenses.

18. Regarding future licenses under category (d), TRAI had already
recommended that all future licenses will be unified licenses and as per
the draft guidelines for unified licenses placed on TRAI website on 16th
January 2012 and 10th February 2012, the entry fee for Pan-India
licence is only Rs.20 crore and for service area based licence, it is only
Rs.2 Cr, 1 Cr and 50 lakh for ‘Metro’ & ‘A’ category, ‘B’ category and ‘C’
category service areas respectively. The provision for surrender of license
is already prescribed in the draft guidelines. As such, the Authority does
not find any justification for a separate exit policy in case of Unified
Licensing Regime.
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Therefore, it is proposed to recommend that:-

a) There is no need for a separate Exit Policy and that the entry fee
paid will continue to be non-refundable.
b) Present conditions in various licences with regard to surrender
of licences, whereby licensee can surrender its licence by giving
a notice of at least 60 calendar days in advance shall continue
to be applicable.

19. Stakeholders are requested to provide their comments/view on this

paper by 5th April, 2012. Comments may be sent, preferably in electronic
form, to Shri Sanjeev Banzal, Advisor (MN), TRAI, to email
advmn@trai.gov.in or at Fax No. +91-11-23212014.

(Rajeev Agrawal)
Secretary

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 Annexure-I

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 Annexure-II

Entry fee:

1. UASL:

One Time non-refundable Entry Fee of Rs. ___________ Crore has been
paid by the LICENSEE prior to signing of this Licence agreement.

2. NLD:

5.1 The LICENCEE shall pay one time non-refundable Entry Fee of Rs
25 crores, before signing of the LICENCE.

3. ILD:

5.1 LICENSEE shall pay one time Entry Fee of Rs 25.00 crores
(Rupees twenty five crores only ), which shall be non-refundable and
shall be payable before signing of LICENCE.

4. VSAT:

5. LICENSEE shall pay one time Entry Fee of Rs.30 lakhs (Rupees
Thirty lakhs only) which shall be non-refundable and shall be payable
before signing of LICENCE.

5. CMTS:

19.1 One –Time Entry Fee of Rs. ___________ Crore has been paid by
the LICENSEE based on the bidding process prior to signing of this
license agreement.

6. GMPCS:

19.1 One –Time Entry Fee of Rs. One Crore is payable by the
LICENSEE at the time of signing of the Licence Agreement.
35.1 The time period of delivery of the Service stipulated in this Licence
shall be deemed as the essence of the contract and the service must be
brought into commission not later than such specified time period. No
extension in delivery date will be granted. If the Service is brought into
commission after the expiry of the due date of commissioning, without
prior written concurrence of the licensor and is accepted, such
commissioning will entail recovery of additional entry fee under this
Condition. Provided further that if the commissioning of service is
effected within 15 calendar days of the expiry of the due commissioning
date then the Licensor shall accept the services without levy of
additional entry fee.

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35.2 In case the Licensee fails to bring the Service or any part thereof
into commission (i.e., fails to deliver the service or to meet the required
coverage criteria) within the period prescribed for the commissioning, the
Licensor shall be entitled to recover additional entry fee as below:
(a) Delay up to 1 year : Rs. 5 Lakh shall be payable on the first day of the
second year.
(b) Delay of more than one year : Rs.5 Lakhs as at (a) above plus and
upto than two years Rs. 5 lakhs payable on the first day of the third
year.
(c) Delay of more than 2 years : Rs. 10 Lakhs as of (b) above plus Rs. 5
lakhs payable on first day of the fourth year and also the licence is liable
to termination in accordance with Condition No.10, Part-I.

7. Resale of IPLC:

8. “ENTRY FEE” The prescribed non-refundable amount of fee to be paid

before signing of LICENCE AGREEMENT to provide IPLC.

8. ISP:

17.1 Entry Fee: One Time non-refundable Entry Fee of Rs. ___________
Lakh has been paid by the LICENSEE prior to signing of this
Licence agreement.

9. VOICE MAIL/AUDIOTEX/ UNIFIED MESSAGING SERVICE:

17.1 There will be no Entry Fee as well as Licence Fee.

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 Annexure-III

Surrender of license:

1. CMTS:

10.3 LICENSEE may surrender the LICENCE, by giving notice of at

least 60 Calendar days in advance. In that case it shall also notify all its
customer of consequential withdrawal of SERVICE by sending a 30
Calendar days notice to each of them. The LICENSEE shall pay all fees
payable by it till the date on which the surrender of the LICENCE
becomes effective. The effective date of surrender of Licence will be 60
Calendar days counted from the date of receipt of such notice by the
licensor.

10.4 It shall be the responsibility of the LICENSEE to maintain the

Quality of Service even during the period when notice for surrender of
LICENCE is pending and if the Quality of Service is not maintained
during the said notice period, it shall be treated as material breach liable
for termination at risk and consequent of the licensee.

2. GMPCS:

10.3 LICENSEE may surrender the LICENCE, by giving notice of at least

60 Calendar days in advance. In that case it shall also notify all its
customer of consequential withdrawal of SERVICE by sending a 30
Calendar days notice to each of them. The LICENSEE shall pay all fees
payable by it till the date on which the surrender of the LICENCE
becomes effective. The effective date of surrender of Licence will be 60
Calendar days counted from the date of receipt of such notice by the
licensor.

10.7 It shall be the responsibility of the LICENSEE to maintain the

Quality of Service, even during the period when the notice for
surrender/termination of LICENSE is pending and if the Quality of
Service is not maintained, during the said notice period, it shall be liable
to pay damages. The quantum of damages and to whom payable shall be
determined by the TRAI. The licensee shall also be liable to pay the
Licence Fee till the end of the notice period and more specifically till the
date on which the surrender/termination becomes effective.

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3. NLD:

13.3 The LICENCEE may surrender the LICENCE by giving notice of at

least 60 days in advance. In that case the LICENCEE shall also notify all
its subscribers of consequential withdrawal of SERVICE by sending a 30
days notice to each of them. The LICENCEE shall pay all fees payable by
it till the date on which the surrender of the LICENCE remains effective.

13.4 It shall be the responsibility of the LICENCEE to maintain the

Quality Of Service even during the period when notice for surrender of
LICENCE is pending and if the Quality of Service is not maintained
during the notice period, it shall be treated as material breach of liable
for termination.

4. UASL:

10.3 LICENSEE may surrender the LICENSE, by giving notice of at

least 60 Calendar days in advance. In that case it shall also notify all its
customer of consequential withdrawal of SERVICE by sending a 30
Calendar days notice to each of them. The LICENSEE shall pay all fees
payable by it till the date on which the surrender of the LICENCE
becomes effective. The effective date of surrender of Licence will be 60
Calendar days counted from the date of receipt of such notice by the
licensor.

10.4 It shall be the responsibility of the LICENSEE to maintain the

Quality of Service even during the period when notice for surrender of
LICENCE is pending and if the Quality of Service is not maintained
during the said notice period, it shall be treated as material breach liable
for termination at risk and consequent of the LICENSEE.

5. VOICE MAIL/AUDIOTEX/ UNIFIED MESSAGING SERVICE:

10.3 LICENSEE may surrender the LICENCE, by giving notice of at least

60 calendar days in advance. In that case it shall also notify all its
customer of consequential withdrawal of SERVICE by sending a 30-
calendar days notice to each of them. The effective date of surrender of
LICENCE will be 60 Calendar days counted from the date of receipt of
such notice by the LICENCOR.

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10.4 It shall be the responsibility of the LICENSEE to maintain the
Quality of Service, even during the period when the notice for
surrender/termination of LICENSE is pending and if the Quality of
Service is not maintained, during the said notice period, it shall be
treated as material breach liable for termination at risk and consequent
of the LICENSEE and Performance Bank Guarantee of Rs.3 lakhs shall
be forfeited

6. ILD License:

13.3 LICENSEE may surrender the LICENCE, by giving an advance

notice, of at least 60 days to the LICENSOR to this effect. The
LICENSEE shall also notify all its subscribers of consequential
withdrawal of SERVICE by sending a 30 days notice to them. The
LICENSEE shall pay all dues payable by it till the date on which the
surrender of the LICENCE becomes effective. The EFFECTIVE DATE of
surrender of LICENCE will be effective on the 60th calendar day, counted
from the date of receipt of such notice by the LICENSOR.

13.4 During the period when a notice for termination or surrender of

LICENCE is pending, the QUALITY OF SERVICE to the subscribers as
per prescribed standards, shall have to be maintained by the LICENSEE,
failing which, it shall be treated as material breach without prejudice to
any other remedy available to the LICENSOR.

7. ISP:

10.9 TERMINATION FOR CONVENIENCE: If the LICENSEE desires to

surrender the licence, it shall give an advance notice of 30 days to the
Licensor to this effect. If the service is in operation, the licensee shall
also intimate its subscribers of consequential withdrawal of service by
serving a 15 days notice to them. The financial liability of the licensee
company for termination of the licence for convenience shall be as
below:-

(i) After start of service:- No surrender charge is payable. However, if

during the notice period, acceptable level of service is not delivered to the
customer, the licensee shall forfeit all claims on the Performance Bank
Guarantee which shall be encashed and the amount shall be adjusted
towards damages.

(ii) Before start of service:- The licensee who have completed the
allocated period to roll out Internet services counted from the date of
issue of the ISP license and have not yet rolled out their services have
option to surrender the license paying 5% of PBG as surrender charge
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within six months of such notification. Further the licensee who has not
completed the allocated period to roll out Internet services counted from
the date of issue of the ISP license and want to surrender ISP licenses
may be permitted to do so within six months form date of such
notification by paying 2.5% of PBG as surrender charges.

10.7 It shall be the responsibility of the LICENSEE to maintain the

Quality of Service, even during the period when the notice for surrender/
termination of LICENSE is pending and if the Quality of Service is not
maintained, during the said notice period, it shall be liable to pay
damages. The LICENSEE shall also be liable to pay the Licence Fee till
the end of the notice period and more specifically till the date on which
the surrender/termination becomes effective.

8. VSAT:

13.3 LICENSEE may surrender the LICENCE, by giving an advance

notice, of at least 60 calendar days to the LICENSOR to this effect. The
LICENSEE shall also notify all its subscribers of consequential
withdrawal of SERVICE by sending a 30 calendar days’ notice to them.
The LICENSEE shall pay all dues payable by it till the date on which the
surrender of the LICENCE becomes effective. The effective date of
surrender of LICENCE will be 60 calendar days counted from the date of
receipt of such notice by the LICENSOR.

13.4 During the period when a notice for termination or surrender of

LICENCE is pending, the QUALITY OF SERVICE to the subscribers as
per prescribed standards, shall have to be maintained by the LICENSEE,
failing which, it shall be treated as material breach without prejudice to
any other remedy available to the LICENSOR.

9. Resale of IPLC:

13.3 LICENSEE may surrender the LICENCE, by giving an advance

notice, of at least 60 days to the LICENSOR to this effect. The LICENSEE
shall also notify all its subscribers of consequential withdrawal of
SERVICE by sending a 30 days notice to them. The LICENSEE shall pay
all dues payable by it till the date on which the surrender of the
LICENCE becomes effective. The EFFECTIVE DATE of surrender of
LICENCE will be effetive on the 60th calendar day, counted from the date
of receipt of such notice by the LICENSOR.

13.4 During the period when a notice for termination or surrender of

LICENCE is pending, the QUALITY OF SERVICE to the subscribers as
per prescribed standards, shall have to be maintained by the LICENSEE,
failing which, it shall be treated as material breach without prejudice to
any other remedy available to the LICENSOR.

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10. PMRTS:

9.3 LICENSEE may surrender the LICENSE, by giving notice of at least

60 Calendar days in advance. In that case it shall also notify all its
customer of consequential withdrawal of SERVICE by sending a 30
Calendar days notice to each of them. The LICENSEE shall pay all fees
payable by it till the date on which the surrender of the LICENSE
becomes effective. The effective date of surrender of License will be 60
Calendar days counted from the date of receipt of such notice by the
licensor.

9.7 It shall be the responsibility of the LICENSEE to maintain the Quality

of Service, even during the period when the notice for
surrender/termination of LICENSE is pending and if the Quality of
Service is not maintained, during the said notice period, the licensee
shall be liable to pay damages. The quantum of damages and to whom
payable shall be determined by the TRAI. The licensee shall also be liable
to pay the License Fee till the end of the notice period and more
specifically till the date on which the surrender/termination becomes
effective.

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