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RCom seeks relaxation in cross-holding norms

The new rules were put in place to promote healthy competition and end the possibility of cartels

Kiran Rathee 

With the entry of Jio the competition has been intensified and incumbent operators have seen a slide in profits as well as revenues
With the entry of Jio the competition has been intensified and incumbent operators have seen a slide in profits as well as revenues

(RCom) has sought relaxation in so that companies can sell equity to existing operators.

Under the current (UL) regime introduced in 2013, service providers are barred from holding either direct or indirect stake in other incumbents providing services in the same area. 

The new rules were put in place to promote healthy competition and end the possibility of cartels.

Before the UL regime, telcos were allowed to hold up to 10 per cent stake in other service providers. Due to the change in cross-holding norms, Vodafone had to sell its 4.2 per cent stake in Bharti Airtel in 2015.

This isn’t the first time is seeking such a relaxation. In 2013, it had opposed restraining firms from holding stake in other operators.  

In a letter to the inter-ministerial group (IMG), formed to study the current financial stress in the sector, the Anil Ambani-owned company has requested that in case of merger of companies, the time to reach the stipulated cap of 50 per cent should be extended to five years. As per current norms, in case of a merger, companies should fall under the stipulated cap of 50 per cent within one year.

“The existing clauses are relevant as long as the financial health of the companies is in order. However, companies availing the strategic debt restructuring (SDR) scheme of RBI are already under severe financial duress and for revitalisation, need to be treated differently,” the letter by to IMG said, a copy of which has been seen by Business Standard.

The Reserve Bank of India in June 2015 had issued the SDR scheme and any of the companies availing the scheme had to be accorded dispensation as laid out by the regulator, the letter said.

The sector has been struggling with a debt of about Rs 4.5 lakh crore. Competition has intensified with the entry of Reliance Jio and incumbent operators have seen a slide in profits as well as revenues.