New Mobile License With Lock In Period!

[Himanshu Singh 19]

With the queue for telecom licences getting longer by the day, the department of telecommunications (DoT) is planning to introduce a lock-in period to weed out non-serious applicants. Such a lock-in is likely to apply on two counts — exit lock-in and ownership lock-in.

If implemented, a new applicant who is allocated spectrum to launch cellular services will be able to sell out only after operating for a certain number of years. At the same time, its promoters will not be able to sell their stake beyond a certain percentage during this period, despite the foreign direct investment (FDI) limit being at 74%. A final call on this will be taken by the DoT committee set up to formulate pre-qualification norms for applicants and screening guidelines for those that qualify.

When contacted, a government official close to the developments told ET: "There’s no final view since the matter is yet to be taken up by the Telecom Commission. Talks are at a conceptual stage, wherein an exit lock-in will prevent a new universal access service licence (UASL) applicant from exiting the business for a specified period. An ownership lock-in will be more complex as it will entail a defined set of norms that prevents the promoter group in a new licensee company from offloading its stake."

The official said the ownership lock-in will ensure a minimum equity investment in a company that has applied for a mobile licence for a specific period. "There is no decision yet on such a minimum ownership threshold. The matter will be discussed by the Telecom Commission shortly," he said.

Besides the possible introduction of exit/ownership lock-in periods, the DoT committee set up to put in place new norms to screen applicants is also looking at tightening roll-out obligations, increasing the net worth of companies eligible to apply, and reducing the 90-day deadline for companies to convert their letters of intent (LoI) into licences.

Sources said the options being explored involve raising the net worth to around Rs 2,000 crore from the current Rs 1,300 crore and companies being asked to convert their LoIs into licences within 10 days. Telecom minister A Raja had said recently: "All licences will be scrutinised and limited applications selected."

A global investment banker said "determining a workable ownership lock-in period will be a tough call, since all associated legal and commercial complexities will have to be weighed against the present financing requirements".

With companies making a beeline for cellular licences, DoT has constituted an agency consisting of members from different government departments to establish the actual identities of the promoters and shareholders behind the new applications. "DoT will do its bit to ensure offshore deals in the nature of ‘benami’ transactions do not transpire and there is genuine transparency," said the top government official.

[copperco2 24]

its also better for upcoming players as what they have do is invest money, raise the infrastructure and make sure that they have some market share over the years.

as and when they sell, the price will vary depending on the market share and the network.. capacity.

[Honest 836]

Apply lock-in period only to new telcos: Tatas to Govt

Press Trust of India l 23 Nov l New Delhi

NEW DELHI: Tatas have asked the government to limit the proposed three-year lock-in period to new telecom players fearing that the move could stall the company's over Rs 13,000-crore equity tie-up with Japanese telecom giant NTT DoCoMo.

"The proposed lock-in provisions be only applied prospectively and that too to start-ups, which have been granted initial licences and which are yet to commence operations or establish their credentials.

"Concluded arrangements like the investment commitments of NTT DoCoMo in TTSL should not be affected," the company said in a letter to Telecom Secretary Siddharth Behura.

NTT DoCoMo took 26 per cent stake in the TTSL for $2.7 billion.

Tatas feel TTSL has been granted licences in January 2008 after a long wait, which included five new UASLs for circles like Assam, North East and Jammu & Kashmir, to complete its pan-India coverage. While services have already been started in Assam, in the remaining two circles it would start from November 30.

"The restriction must certainly not be imposed on licensees/promoters which have already established their commitment and participation and which have recently been granted some licences, to complete their pan-India coverage," the letter stated.

Tata Sons, is a long standing promoter of TTSL, and has invested Rs 3,800 crore in the company over the last 10 years.

Recently Japanese major NTT DoCoMo made a contractual commitment to subscribe to 20 per cent fresh equity in TTSL and purchase further 6 per cent equity held by Tata Sons and any other shareholders in TTSL, the company told DoT.

[Honest 836]

TRAI paper on 3-Yr lock-in time for promoters'equity in telcos

Press Trust of India l 8 Dec l New Delhi

Telecom regulator TRAI will soon issue a consultation paper shortly on a proposal by the Department of Telecom for a lock-in period for promoters' equity in telecom companies to get the views of the industry and the experts

The government has referred the two issues -- the three-year lock-in period and the spectrum charges with regard to 3G and 2G services-- to the telecom regulator, TRAI Chairman Nripendra Misra told PTI.

The move gains importance after two new telecom players - Swan and Unitech - sold stakes to foreign companies at high premiums after they were allotted spectrum.

The Left parties had accused Telecom Minister A Raja of underselling spectrum and had said it cost the national exchequer around Rs 60,000 crore.

The Department of Telecom has proposed a three-year lock- in period for equity in companies to avoid major shareholders selling stake at a premium even before starting the services. It has been alleged that some new telecom companies have sold their promoters' stake at high premium after obtaining the precious spectrum at a nominal price.

TRAI has to issue a consultation paper on the lock-in period first and after that whether to go for a limited open house or full open house, would be decided later, he said.

"We had earlier given our recommendations on lock-in period in case of mergers and acquisitions but the promoters issue is slightly broader in the context of USAL licence," the Chairman added.

"The promoters who have over 10 per cent stake in a company, the question is should it be disallowed for three years from the effective date of licence to sell their equity. The issue of additional equity and if this could be applicable where the issue of transfer of shares", said DoT's letter to TRAI.