Dot To Examine Loop’s Licence Eligibility

[savramesh 37]

Financial Cronicle

Apr 26 2009 2152 hrs IST

Department of telecom (DoT) is likely to examine this week the eligibility of Loop Telecom to hold mobile licences. Essar Group holds less than 10 per cent stake in Loop Telecom.

DoT had asked the ministry of corporate affairs (MCA) to look into the shareholding patterns of Loop Telecom. A senior DoT official, requesting annonymity, told Financial Chronicle that the department has received a reply from MCA asking them to examine their policy and regulations for eligibility for grant of licence to Loop Telecom.

The official said the action on the letter would be taken this week. The department would examine whether Loop Telecom was eligible to receive the mobile licences or not. If DoT finds out that the company does not meet the eligibility criteria, then it may consider withdrawing the licences awarded to Loop Telecom.

MCA has raised concerns over Essar Group’s indirect investments in Loop Telecom, the official said, adding that MCA had examined the issue of ownership of Loop Telecom by Essar Group and its link with BPL Communications. The unified service access licence (UASL) guidelines says that the same company can not hold more than 10 per cent in telecom firms offering services in the same operating area or circles. Essar holds 33 per cent stake in country’s third largest mobile firm Vodafone-Essar.

Essar owns a 9.9 per cent stake in BPL Mobile (now Loop Mobile), which operates only in the Mumbai service area and Loop Telecom is a majority-owned unit of the Mumbai operator (Loop Mobile), which had got licences for the other 21 service areas. Vodafone-Essar is a pan-India operator having licence for 21 circles.

Demystifying the ownership structure, MCA has informed DoT that Santa Trading (STPL) owns BPL Communication and BPL Mobile Communications. STPL holds 85.75 per cent of BPL Communications, which in turn holds 73.99 per cent of BPL Mobile Communications, which in turn holds 51.24 per cent of Loop Telecom. Essar Group holds 9.9 per cent stake in BPL Mobile.So effectively, Loop Telecom is a company backed by the Ruias, even though their equity is less than 9.9 per cent that complies with regulatory norms. Essar Group had maintained that the company had followed the guidelines by restricting their stake in BPL Mobile to less than 10 per cent.

Loop Telecom had received licences in 21 circles in January 2007, but is yet to launch its mobile services. It had recently tied-up with China’s telecom equipment vendor ZTE for rolling out of its GSM-based network. Differences had erupted between Vodafone and its Indian joint venture partner, the Ruias of the Essar Group, over Loop Telecom which had got licences to launch GSM services.