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Our Bureau

New Delhi, March 12 The Telecom Regulatory Authority of India (TRAI) on Thursday said promoters of new telecom companies should be asked to give the Government 50 per cent of the profits earned from selling their equity within three years of taking the licence.

The profit on sale of such shares shall be defined as the difference between sale value of equity shares on the date on which the transfer of such shares takes place and their face value on the date of application for UAS licence.

TRAI also said that if the promoters pledge their shares with a bank for taking loans then they will not be allowed to transfer the equity during the three-year lock-in period, in case of default in payments.

Announcing its recommendations, TRAI said, “there should be a lock-in of the equity share capital of promoter(s), whose net-worth has been taken into consideration for determining the eligibility for grant of UAS licence, for a period of three years from the effective date of licence.”

The Department of Telecom had sought TRAI’s views on how to “prevent fly-by-night operators making a windfall gain.” This was done after concerns were raised over new private telecom players making windfall gains allegedly at the cost of the national exchequer.

The Government’s decision to give out fresh telecom licences on ‘first come first served’ basis has resulted in windfall gains to some Indian promoters of new telecom companies.

Unitech, which had sold its 60 per cent stake to Telenor, has made a profit of Rs 4,470 crore. Swan Telecom sold 45 per cent stake to the UAE-based Etisalat for Rs 4,100 crore ($900 million). This was Rs 2,450 crore more than what its promoters paid to acquire the licences in February. Unitech also had acquired licences for 22 circles by paying Rs 1,650 crore to the Government. The valuations received by these Indian companies are unprecedented as neither of them has a single subscriber nor any infrastructure.

However, the regulator’s suggestions, if implemented by the Government, will have no impact on the Unitech-Telenor deal or on the agreement announced by Swan and Etisalat. In both these deals, the promoters have not diluted their share but have brought in a strategic partner by issuing fresh equity shares. TRAI said that such deals should be permitted as long as the promoters’ share in the company does not fall below 10 per cent.

Market watchers said that though TRAI’s proposals will act as a check on promoters diluting their stake, it has left a loop hole by allowing them to issue fresh equity, thus not addressing the issue of companies making windfall gains. New players such as Datacom, Loop and STel will be able to bring in foreign investors through this route though TRAI has made sure that the promoters of these companies do not get any direct gains.

More Stories on : Regulatory Bodies & Rulings | Telecommunications

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