Sterling Cellular Funding Plan On Hold

The FIPB closed the proposal at its meeting on August 24. In a letter to the FIPB, the department has said that "certain new facts and issues have recently come up which are under consideration. These would be in the new note being prepared by DoT. Therefore, the proposal of Sterling Cellular to route all investments of Swiss Telecom PTT through the foreign company's 100 per cent subsidiary Mobilevest should be closed till DoT comes up with a fresh proposal as and when required."

Top DoT officials were not willing to comment. "A review is on and the department will make its position clear in some time," a source told Business Standard. It is understood that M P Modi, telecom commission chairman, has decided to take a tough stance regarding subsidiaries despite his predecessor, R K Takkar, taking a lenient view on the issue.

 

However, Sterling Cellular (controlled by Essar Telecom) officials claimed that the proposal "had not been rejected outright". "Since the proposal involved replacement of Swiss PTT's equity with that of Mobilevest, DoT wants to ascertain the net worth and other qualifying parameters of the Swiss company's subsidiary," a company official said.

DoT's tough stand has got cellular companies worried. Most cellular operators have decided to plump for holding companies to bring down their share of equity in the operating company. Top functionaries of companies feel that the holding company route is the only way they can get over the problem of mobilising huge sums of capital needed for investment.

"Besides," as one official asks, "DoT has already cleared four such proposals and in some cases foreign capital has already come in. How is DoT going to reverse that?" The holding company proposals of Hutchison Max, BPL Mobile, Bharti Cellular and Modicom Networks have already been cleared by DoT and FIPB.

This is the second proposal that has been shelved in recent weeks. DoT had raised objections to a joint venture between Shyam Telecom and Telesystems International Wireless Corporation, Canada. The FIPB rejected the JV proposal on August 17.

A proposal by Asian Infrastructure Fund to invest 49.99 per cent in SC Cellular Holding, a JV with Sanmar Electronics, has also been put on the backburner.

Sanmar Electronics proposed to finance its 20 per cent stake in JT Mobile through this JV. The holding company proposal of Fascel, in which American Insurance Group has reportedly decided to take up a stake, is also pending clearance.