The plans of Bharti Airtel to raise its stake in Qualcomm’s broadband venture to 93.45 per cent from 51 per cent may face bureaucratic hurdles.
One of the wings in the Department of Telecom has questioned Bharti Airtel’s move because the rules set for the broadband auction held in 2010 stipulated that the original bidder should hold at least 26 per cent in the venture. After the deal with Bharti Airtel, Qualcomm’s stake will drop to 6.55 per cent. Airtel had increased its stake to 51 per cent from 49 per cent in July.
Qualcomm was the original bidder, winning broadband spectrum in four circles, including Delhi and Mumbai. This was later sold to Bharti Airtel. The problem is that the auction rules do not make it clear if the original bidder has to retain 26 per cent stake at the time of taking the licence or for the entire duration of the licence, which is 20 years.
The DoT’s licensing arm wants the Wireless Planning & Coordination wing to clarify this issue.
“A view needs to be taken on whether the condition of minimum holding of 26 per cent of equity by successful bidder in the new entrant ISP licence is applicable at the time of acquiring the ISP licence only or it has to be maintained throughout the period during which the new entrant holds the broadband spectrum,” stated an internal DoT note.
The question has been raised also to determine who is responsible for the obligations specified under the auction rules in case the original bidder sells its stake.
But one of the Deputy Director-Generals in the DoT has stated that the obligation lies with the company and not the shareholders. While noting the observation of the licensing wing, the Director has stated that the Airtel deal should be allowed so as to promote investments.
However, the DoT has kept out older licences from the purview of the current investigation which means that the deal between Reliance Industries and Infotel Broadband is not being questioned. Reliance Industries had acquired a stake in Infotel Broadband, which already had an ISP licence at the time of bidding for spectrum.
According to the DoT note, the auction rules did not specify the 26 per cent holding requirement for incumbent players.
But since Qualcomm entered the auction as a new bidder, the DoT has limited its scrutiny to the deal between the US chipmaker and Airtel.