The Hindu Business Line : DoT objects to Idea Cellular pledging equity without Govt nod

Idea Cellular executives denied that the company had flouted any norms and that it was very normal for a company to pledge the shares as long as it fulfilled all set conditions.

New Delhi , Oct. 29

THE Department of Telecom has raised objection to Idea Cellular pledging 98 per cent of its equity capital to its lenders without the Government's consent.

DoT has objected to the fact that Idea Cellular has agreed to transfer the equity to the foreign lender's trustees IDBI Trusteeship Services Ltd and UTI Bank Services in the event of a default.

While IDBI Trusteeship is acting as the security trustee on behalf of Idea Cellular's long-term foreign lenders, UTI Bank Services is the debenture trustee.

`No norms flouted': When contacted, Idea Cellular executives said the company had so far not received any communication from DoT in this regard. They, however, denied that the company had flouted any norms and that it was very normal for a company to pledge the shares as long as it fulfilled all set conditions.

As per the licence norms, the right to take over the services, equipment and network of the operator is only with the Department of Telecom. "Cellular licence agreement stipulates that the operator shall not, without prior written consent of the licensor, assign or transfer its right in any manner to any other party. It seems that in the event of a default, about 98 per cent equity capital of the licensee company would stand transferred in favour of the trustees. This is contrary to the licence agreement," said a senior DoT official.

The company is likely to be issued a show cause notice by DoT seeking an explanation for violating the licence norms within 15 days.

This is the second time that Idea Cellular's plans have come under fire from DoT. Earlier, the company's attempts to bring in STT and Malaysia Telecom as foreign investors in place of US-based Cingular Wireless was scuttled after DoT refused to approve the deal.

DoT had objected in that instance on the grounds that investments from STT and Malaysia telecom would violate the licence condition that a single entity can not hold more than 10 per cent equity in two different companies operating in the same circle. Already, SingTel has more than 30 per cent stake in Bharti Tele-Ventures, which has operations in the same circles as Idea Cellular. Temasek Holding has investments in STT, Malaysia Telecom and SingTel.

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