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Thomas K Thomas

New Delhi, Nov. 14 The Finance Ministry has asked Department of Telecom to collect spectrum transfer charge from promoters of new telecom companies who sell their equity stake. This means that a promoter who sells his equity in a cellular service business to another entity, will have to first give a fee to the Government before he can complete the deal. This is similar to the registration fees paid to the Government while buying property.

DoT has already decided to ban promoters from selling their shares and issuing special dividend for a 3-year period. But the Finance Ministry wants the clause on spectrum transfer fee to be included to act as a deterrent against direct equity sale by promoters even after the lock-in period expires.

The move is aimed at addressing concerns raised by Opposition parties that the Government had lost out on an opportunity to earn huge revenues due to the current spectrum allocation policy, even as the new players have made a windfall gain by selling stake to foreign players.

However, new telecom companies which bring in a strategic investor by issuing fresh shares will not be asked to pay the fee. This means that even if the Finance Ministry’s proposals are accepted it will have no impact on the Unitech-Telenor and Swan-Etisalat deals as both have been done through issue of fresh equity shares.

The Ministry’s suggestion was discussed at a meeting of the Telecom Commission on November 11. Senior Government officials said that a detailed note on this aspect and other issues related to the new players would be formulated soon. The exact quantum of the fee will be determined in consultation with the Telecom Regulatory Authority of India.

Government sources said that while private companies are raking in huge amounts of money by selling and buying businesses which uses a public resource such as spectrum, the Government was not benefiting out of such deals. They also pointed out that the private companies are benefiting from the Government’s policy to allocate spectrum at subsidised charges instead of market-driven value and, therefore, it was justified that they be asked to give a percentage of the profit they get from M&A deals.

Recently, Swan sold 45 per cent stake to Etisalat for $900 million and Unitech sold 60 per cent stake to Telenor for $1.1 billion. Both Swan and Unitech paid only Rs 1,650 crore to the Government for the spectrum.

The new players are not too happy with the proposal as they claimed that the high valuations being received by mobile companies was due to the potential of the Indian mobile market.

More Stories on : Telecommunications | Regulatory Bodies & Rulings

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