DoT may reconsider Etisalat DB-Allianz merger proposal

The Department of Telecom (DoT) may relook mobile operator Etislat DB's proposal of merging new player Allianz Infratech with itself, as it now feels that the deal does not involve sale of equity, which is barred for three years.

The DoT in October this year rejected a proposal from UAE-based Etisalat DB Telecom to merge Allianz Infratech with itself. It shot down the proposal on the grounds that there is a three-year lock-in on sale of equity by new operators.

"This arrangement appears to deal in no way with merger of companies which is in fact the issue of the present reference of DoT. Merger as well as demerger of companies take place as per the provisions of the Companies Act, 1956. Accordingly, DoT may give a re-look regarding their draft proposal. The lock-in period clause deals with sale of equity of person as a substantial shareholder," said the note.

DoT officials were not available for comment.

Both Etisalat DB and Allianz Infratech got licences for offering mobile services in 2008. While Etisalat DB has licences in 13 circles, Allianz has licences for two circles.

Etisalat bought 45 per cent stake in Swan telecom earlier for USD 900 million. Later, Swan Telecom was renamed Etisalat DB.

According to the rule, promoters of new operators will not be allowed to sell their stake in the company within the first three years.

The DoT had allowed the new players to issue fresh equity in case they wanted to bring in new investors. A merger between Etisalat DB and Allianz would violate this norm, the DoT had said in an internal DoT note earlier.