Press Note 1 blow for Idea Cellular

FIPB wants Bharti nod for stake buy by foreign firms.

In the first instance of the provisions of Press Note 1 coming into force, the Foreign Investment Promotion Board (FIPB) has said the proposal of Singapore Technologies Telemedia (STT) and TM International (TMI) of Malaysia to acquire a 47.7 per cent stake in Idea Cellular will need a no-objection certificate (NOC) from Bharti Tele-Ventures.

FIPB is of the view that STT is wholly-owned by Singapore-based Temasek Holdings, which holds 63 per cent stake in Singapore Telecom (SingTel), which, in turn, is the largest foreign shareholder in Bharti Tele-Ventures, with a 28.22 per cent stake. Hence, a no-objection certificate from Bharti Televentures is required.

According to government sources, the FIPB feels that Temasek is the real investor and the foreign companies should obtain a no-objection certificate from Bharti Tele-Ventures under the provisions of Press Note 1, as both the companies are engaged in the same area of business.

Sources also said in the meetings with the government, representatives of Idea Cellular had pointed out to the investment broad that it did not come under the purview of Press Note 1.

It is worth noting that the department of telecommunications had also opposed the investment proposal as under the policy no single entity shall have substantial equity in more than one telecom licence holder in the country.

The telecom department is of the view that if the investment is allowed, Temasek will have substantial control of two Indian telecom service providers.

Besides, Temasek also holds 5 per cent in Telekom Malaysia. TMI is the global investment arm of Telekom Malaysia. It was also pointed out by FIPB that Temasek would have a significant stake in two companies offering cellular services in eight common circles - Delhi, Maharashtra, Andhra Pradesh, Gujarat, Kerala, Uttar Pradesh (West), Haryana and Madhya Pradesh.

It was also pointed out that by acquiring AT&T's stake in Idea Cellular, STT and TMI would own a 32.91 per cent stake in Idea. Besides, subscribing through AT&T to an additional 637,549, 725 new shares of the Idea Cellular, the consortium if STT and TMI will go up to 47.67 per cent.

This move by the two companies follows the deal signed by STT and TMI in December 2004, the to acquire 47.7 per cent stake in Idea Cellular at an estimated cost of $390 million.

If the deal goes through, STT will become the single-largest shareholder in Idea with an effective 28.62 per cent holding. As per the deal, the consortium will acquire Cingular Wireless' entire stake in Idea.

Cingular is an AT&T affiliate. The Tata group and the AV Birla group will get to hold 26.3 per cent and 24.7 per cent, respectively, in Idea Cellular.