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| Trai supports 3-year lock-in for stake sale |
| BS Reporter / New Delhi Mar 13, 2009, 01:20 IST |
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Endorsing the Department of Telecommunication’s (DoT’s) view, the Telecom Regulatory Authority of India (Trai) today recommended a three-year lock-in period for stake sale by promoters who have recently received mobile service licences.
At the same time, the regulator has given a major concession to the new players. It has recommended that with prior permission from the licensor and on fulfillment of rollout obligations, the promoters may be allowed to sell stake even during the lock-in period. This permission is, however, based on the condition that half of the profit earned on the stake-sale is retained in the company and utilised for network expansion, while the rest is transferred to the licensor.
In December 2008, Telecom Commission, the policy-making arm of the DoT, had come out with a proposal prohibiting the promoters of telecom companies from selling their stake for three to five years. The move came in the wake of allegations against the DoT for selling spectrum, a scarce resource needed for optimum quality of telecom services, at throwaway prices to companies, which in turn sold stakes in the venture at a huge premium. This move was aimed at Swan, Shyam, Unitech, Loop Telecom, S Tel and Datacom, which were all given licences in early 2008.
Unitech Wireless had bought a pan-India licence for Rs 1,650 crore before giving 60 per cent of it at an enterprise value of Rs 11,620 crore to the Norway-based Telenor last year.
Trai has also endorsed the DoT view that companies can issue additional share capital and get a new player without the lock-in period being applicable to them. However the equity of the promoter(s) should not fall below 10 per cent of the total aggregate during the period. Also, the management control of the licensee company will be governed by the terms and conditions of the licence agreement.
Trai has also specified that a company will have to inform the DoT about any change or dilution in the stake of promoters within two days of the change.
A certificate from the company secretary and statutory auditors needs to be filed within 15 days from the date of transaction.
Analysts, however, dismiss the move as too little and too late. Telecom analyst Mahesh Uppal said, “This will not be easy to implement. The government should prevent the entry of such players in the first place, (and) not restrict the entry of serious players.”
“This could not only hurt the new players but also potentially hurt some of the large players as well. The government should not take moves to hurt commercial flexibility,” he added.
Telecom operators are not happy with the move either. GSM lobby Cellular Operators’ Association of India Secretary General TV Ramachandran said, “ We have always opposed the idea of lock-in ...anything done on a retrospective basis does not make sense in this regard.”
Trai’s recommendations have been sent to the DoT, which will take the final decision.
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