Dot Thwarts Bplchs Revamp Plans Plans To Divest Stake In Cell

The department of telecommunications (DoT) has raised objections to a restructuring proposal by the Nambiar family, the promoters of BPL Cellular Holdings (BPLCH). They had proposed to place 5 per cent of BPLCH equity and some 15 million preference shares with the Commonwealth Development Corporation (CDC), a UK development fund.

DoT has objected to the private placement of equity with CDC Financial Services (Mauritius) Ltd on the grounds that BPLCH has made investments in the licensee companies - BPL Mobile Communications Ltd (the Mumbai cellular operator) in violation of terms and conditions of respective licence agreements. BPL Mobile and BPL US West Cellular Ltd are the subsidiaries of BPLCH. It now wants the recast proposal to be deferred.

 

Sources said DoTs objections arose due to the complete sell-out of LCC Inc, the US-based cellular operator, which held 13.5 per cent in BPL Mobile. According to the proposal before the FIPB, LCC was to swap the 13.5 per cent stake in BPL Mobile for 12.2 per cent in BPLCH. Under DoTs licence conditions for cellular companies, an original promoter is not allowed to reduce stake to less than 10 per cent or its original stake, whichever is higher, for a lock-in period of three years,. Therefore, DoT contended that LCCs sale was violative of the conditions.

Overruling the views of DoT, the foreign investment promotion board (FIPB) felt that the proposal cannot be but supported since the company sought to bring in a substantial investment. However, the concerns (of) DoT would be suitably incorporated in the approval letter, the FIPB decided while noting that the investment being brought in by BPLCH would conform to the foreign equity ceiling of 49 per cent as mandated in the departments licence conditions for cellular companies.

The DoT, thereafter, agreed to the proposal subject to the condition that BPL Cellular Holdings Ltd will hold Indian equity in the licensee companies for telecom services viz.

BPL Mobile Comm Ltd and BPL US West Cellular Ltd, to the extent as indicated in the respective licence agreements and any change, if required, shall be subject to the prior approval of the Telecom Authority. The telecom authority, in telecom parlance, is the secretary, DoT.

In its comments, the department of economic affairs (DEA) said it did not have any objections to the BPLCH recast proposal. The 2.85 million shares would be sold at Rs 313.50 a share aggregating to Rs 89.32 crore, while the 15.10 million non-convertible preference shares (face value of Rs 100) would be placed at the rate of Rs 54 per share aggregating Rs 81.68 crore resulting in a yield to maturity of 13 per cent.

The DEA concluded that it had no objection to the sale of equity and preference shares, but noted that specific approval would be required for fees and expenses. (BPLCH had also sought permission for an expenditure of $2 million as fees and expenses for the two transactions.) The FIPB recommended the proposal for consideration and approval of the Cabinet Committee on Foreign Investments subject to conditions suggested by DoT and DEA.