DoT for dividend restrictions on new telecom companies

The Department of Telecommunications (DoT) wants no declaration of special dividends for three years by companies which have received new Unified Access Service Licences and are raising funds by issuing fresh equity.

However, this rule will not be applicable to companies holding licences for a period of three years, even if they acquire licences in other circles to expand their operations, according to sources close to the development.

The suggestion was made by the DoT to the Telecom Regulatory Authority of India (Trai), which will decide on making it a regulation, along with other suggestions on the lock-in period put forward by the licensor.

The DoT recommendation aims at restricting “fly-by-night” operators from making a “windfall gain”.

Tata Teleservices Ltd (TTSL) is one company that has recently issued fresh equity. It issued 20 per cent fresh equity to Japanese telecom major NTT DoCoMo (along with 6 per cent from existing shareholders) for around $2.7 billion.

A TTSL spokesperson said the recommendation would not impact the company as it was not applicable to new players. The company is one of the earlier entrants to mobile telephony and provides a pan-Indian service using the CDMA technology.

The rule, however, will be applicable to companies like Unitech Wireless, which has given equity stake to Telenor and Swan Telecom.

According to industry analysts, this would also have an impact on those companies that want to give a bonanza to their shareholders.

The regulator had earlier recommended a three-year lock-in period for the operators for selling the equity.

Trai is mulling to roll out a consultancy paper to get the industry’s opinion on the issue, based on which necessary amendments would be made in the existing regulations.