Escotel Mobile Communications Limited

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Escotel Mobile Communications Limited was awarded a 10 year cellular service license for each of the following telecom circles: Haryana, Uttar Pradesh (West), and Kerala. Escotel Mobile Communications Limited is owned by Escorts Limited (51%) and First Pacific Company of Hong Kong (49%). In August 2001, the company won licenses for four additional circles including Punjab, Uttar Pradesh (East), Rajasthan and Himachal Pradesh. In February 2004, Idea Cellular Ltd. acquired 100 percent stake in Escotel Mobile Communications Limited and Escorts Telecommunications Limited for an enterprise value of around Rs 115,000 lakh (US$ 261 million). Idea Cellular Limited is jointly owned by Aditya Birla Group (33.33 percent), Tata Group (33.3 percent) and Cingular Wireless LLC (33.33 percent). Cingular Wireless LLC in turn is a joint venture between SBC Communications Inc. and BellSouth Corp. The company launched its commercial services in Haryana in November 1996. The company committed to pay US$325 million in license fees for the three circles over the first 10 years. The license was later extended to a 15 year term. However, like many other companies, Escotel Mobile faced difficulties in paying its license fees. To reduce the financial burden placed on the telecom operators, a new revenue sharing license fee structure was introduced with the New Telecom Policy in July 1999. This payment structure enabled all telecom license operators in 1999 to switch to a new 15% revenue sharing policy, provided they complete their payment on accumulating dues by January 31, 2000 and that both operators in the circle agree to switch over to the new system. By July 1999, the company was obliged to pay US$94.1 million in license fees prior to switching to the revenue sharing system. In 1999, the company paid US$9.4 million to complete the license fee obligation before moving to the new revenue sharing scheme. By 1997, the company mobilized a total of US$245 million to finance its first three years of operations. Of that, US$78 million was raised through equity, US$23 million through subordinate debt, US$129 million through term loans, and the remaining from short-term loans, international accruals and security deposits. The company reached financial closure for its cellular networks requirements in 1997, which included US$129 million external commercial borrowing syndication lead by Chase Manhattan Bank and included the Export - Import Bank of the United States, Eksportfinance Bank of Norway and other Asian and European banks. Project merged into Idea Cellular Limited in 2004. See http://www.blonnet.com/2002/01/12/stories/2002011200910700.htm, "Escotel to invest Rs 750 cr in Kerala" http://www.blonnet.com/2001/04/06/stories/150639cc.htm, "Escotel Mobile to widen coverage" None