Stake sale for new telecom licensees may be eased

But half the 'profit' should be ploughed back into the company, says Trai.

In a significant relaxation of its earlier stand, the Telecom Regulatory Authority of India (Trai) has proposed that new telecom licencees can sell equity even during the proposed three-year lock-in period, provided some stringent conditions are met.

Apart from the rollout obligations, which were tightened following the recent sale of stake by a couple of new licencees, the regulator now wants companies to pump in 50 per cent of the “profit” earned from stake sale into network expansion plans.

Trai terms “profit” as the difference between the valuation of a company at the time of applying for a telecom licence and at the time of the transfer of stake.

Moreover, the remaining 50 per cent of the profits should be transferred to the Department of Telecommunications which sold spectrum to the new licencees, sources close to the development told Business Standard.

Trai has sought permission from DoT and the Department of Economic Affairs under the ministry of finance to bring these proposals into force. The regulator expects a final approval from the ministries by the first week of April.

Additionally, Trai is also learnt to be in consultation with the law and finance ministries to extend this ruling to all stake-sale by new telecom licencees that took place in the country. If this is granted, companies like Unitech Wireless and Swan Telecom, which had recently sold stakes to foreign companies, are likely to be impacted.

Unitech Wireless had sold 60 per cent stake to Norwegian telecom major Telenor for around Rs 6,120 crore, while Swan Telecom sold 45 per cent stake for Rs 4,113 to UAE-based Etisalat. These sales had stirred up controversies, as the two companies had paid Rs 1,651 crore each as licence fees. The valuation at the time of the stake-sale was substantially higher.

Following this, Telecom Minister A Raja had sought stringent norms for companies which were planning to offload equity at a huge premium after getting spectrum from the government. Trai had sought a three-year lock-in period for companies which were awarded spectrum recently (yet to become a regulation), following the controversies.

The lock-in period, however, will not be applicable if companies were to issue fresh share capital to investors and foreign telecom majors.