DoT for abolition of cross-holding

In a recent note, DoT has proposed to include new clause in upcoming Unified Licensing regime

The department of telecommunications (DoT) has moved a proposal to prohibit direct or indirect cross-holding by a telecom company or its promoter in a competing firm in the same circle. In a recent note, DoT has proposed to include this clause in the upcoming Unified Licensing (UL) regime.

The existing Unified Access Service Licence (UASL) norms allow promoters of a telecom company to have up to 10 per cent equity stake in another firm in the same circle.

If the new clause mooted by DoT gets incorporated in the UL, companies such as Vodafone Plc, which holds 4.4 per cent stake in Bharti Airtel, will have to exit as it holds a majority stake in Vodafone India. According to the UASL norms, no single company or legal person, either directly or through associates, can have ‘substantial equity’ holding in more than one licencee company in the same service area for the basic, cellular and unified access services.

‘Substantial equity’ means an equity of 10 per cent or more.The 10 per cent cross-holding cap had earlier triggered controversies. The Ruias of Essar Group came under the lens of the Central Bureau of Investigation (CBI) for the Group’s alleged links with Loop Telecom. CBI had claimed the group held more than 9.9 per cent stake, violating the current policy.

At the same time,Essar had a 33 per cent stake in Vodafone-Essar, which it later sold to the British telco. However, Ruias denied the charges.

A few years ago, the Tatas also had a 48 per cent stake in Aditya Birla group’s Idea Cellular, while they had controlling stake in Tata Teleservices. The Tatas later sold their stake in Idea to the Aditya Birla group.