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US telecom company AT&T will acquire the 26 per cent stake held by the Mahindra Group in their joint venture in two tranches.
AT&T, which currently owns a 74 per cent stake in AT&T Global Networks Services India, will increase its holding to 98.67 per cent by the first transaction and then to 100 per cent. The value of the deal is not known yet.
Long-distance telephony AT&T Global Networks provides long-distance telephony services to large enterprises in India, including bandwidth for carrying data traffic across multiple locations using a global network of terrestrial and under-sea cables. The company competes with the likes of BT, Verizon and Tata Communications for the enterprise communications market. AT&T also had investments in Tech Mahindra and Idea Cellular, but exited these two companies.
The move to increase stake in the long-distance telephony arm comes after the Government allowed 100 per cent FDI in the telecom sector. A number of other foreign telecom companies, including UK-based Vodafone and Russia’s Sistema, have taken advantage of the new norm.
AT&T has sought the approval of the Foreign Investment Promotion Board (FIPB) to buy out Mahindra’s stake in the venture. Mahindra holds the stake through Mahindra Telecommunications Investment Pte Ltd.
In the application made to the FIPB, AT&T has explained that the transaction has been divided into two tranches to comply with the Companies Act, 1956 and the Private Limited Company and Unlisted Public Company Rules, 1999, under which a company can buy back only 25 per cent of equity shares in a financial year.
According to Government sources, the Department of Telecommunications (DoT) has expressed reservation in giving clearance to the second transaction because AT&T has not explained how the balance 1.33 per cent will be transferred from Mahindra.
“The application states an appropriate methodology for transfer of shares will be adopted, but the company has neither made the methodology clear nor the resulting FDI inflow. Hence, this transaction is not clear,” said a senior DoT official.
Therefore, the DoT has told the FIPB that approval may be given to increase stake to 98.67 per cent for the moment. Sources said AT&T may be asked to explain the transaction details to the FIPB.
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