Tata group telecom flagship Tata Teleservices, after its aborted plan to snap up Hughes Tele.com, is now planning to draw the battle line with Hughes Network’s Indian arm. Tata Teleservices has decided to convert its letter of intent (LoI) for the Maharashtra circle — a crucial part of its overall telecom gameplan — into a license before the deadline expires on March 31. The Tatas will approach the Department of Telecommunications (DoT) this week to offer the mandatory bank guarantee and pay entry fees to get a basic telephony licence for Maharashtra.

S Ramakrishnan, managing director of Tata Teleservices, said the company would pay the entry fee and provide bank guarantee to convert the existing LoI for Maharashtra before the deadline expires. If the company does not cough up funds, the LoI will expire on March 31. The company had already sought an extension of time from October 2001. The Tatas were one of the original bidders for the Maharashtra circle when the sector was opened up to the private sector way back in 1995. However, it lost out in the bidding game then to Hughes Ispat (now Hughes Tele.com).

Last year, the Tatas announced that they would like to enter the Maharashtra circle by combining its Andhra Pradesh basic circle with Hughes Tele.com’s Maharashtra circle. At the same time, they also received the LoI from the government after the second round of bidding for basic circles. But due to differences in valuation of the businesses, Hughes and Tatas aborted amalgamation talks in January 2002. Though talks were on between the two telecom players, Tatas did not allow the Maharashtra LoI to expire by asking for extension of time from the government.

The exact entry fee and bank guarantee for the Maharashtra circle could not be ascertained. The company had in September, 2001, paid an entry fee of Rs 175 crore and provided bank guarantee of Rs 700 crore towards short distance charging areas (SDCA) roll out obligations in circles such as Gujarat, Tamil Nadu, Karnataka and New Delhi. The roll out in all the four circles is estimated to cost the company around Rs 3,555 crore over the next five years. Since Tata Teleservices is now adding Maharashtra as well into the kitty, the project size would swell.

Hughes Tele.com, its rival with 1.25 lakh basic users, is investing around Rs 3,800 crore to complete the roll out plan in Maharashtra. According to Ramakrishnan, the company is in final process of raising funds from the financial institutions and banks to part-finance the roll out plan. Tata Teleservices has already approached the Industrial Development Bank of India and other firms to raise funds for the development of fresh basic circles and other projects. Tata Teleservices will decide against its plan to enter the national long distance telephony venture since the Tata group picked up a 25 per cent stake in Videsh Sanchar Nigam, which will launch NLD services shortly.