Comments
The Solicitor General of India has given an opinion that the public sector firm Telecommunications Consultants India Ltd (TCIL) should not agree to Bharti Airtel’s demand to collect a development and know-how fee from Bharti Hexacom.
TCIL holds 30 per cent stake in Bharti Hexacom, while the balance is held by Bharti Airtel Ltd. TCIL’s investment in Bharti Hexacom (mobile operator in Rajasthan) as of now is Rs 106 crore.
Management fees
The SG’s opinion comes after an independent consultant appointed by TCIL gave its report on the matter. Airtel had demanded a higher management fees and the introduction of development and know-how fee.
TCIL appointed IFCI as an independent consultant to examine this demand. The consultant said Airtel cannot be restricted from charging management fee from Hexacom. It also said the existing methodology of charging the fee was reasonable in the light of benefits accrued to Hexacom by being part of the centralised services under the Bharti Airtel group.
The consultant also found reasonable the proposed revised methodology of charging marketing expenses for using the Airtel brand. However, the consultants rejected the proposal to charge development and technical know-how fee on grounds that all such royalties are covered under the management fee structure already charged by Airtel. “Should Bharti Airtel decline the request of TCIL in this regard, it can then consider approaching the Company Law Board on grounds of oppression and mismanagement,” said an internal Government note.
The Solicitor General has also given a view that TCIL should not agree to list Bharti Hexacom. According to the legal expert, TCIL’s stake will fall below 25 per cent if the company is listed. “In such an event TCIl would be disabled from blocking any special resolution which Bharti Airtel may seek to pass,” the Solictor General has opined. Airtel had earlier proposed to list Hexacom in a bid to fix the company’s valuation.
On the issued of payment of dividend, the SG has suggested to accept Bharti Airtel’s proposal to declare dividend of 20 per cent for the financial year 2011-12. Airtel had initially resisted paying dividend but later agreed to pay.
Meanwhile, a separate proposal had been sent to the Cabinet for selling TCIL’s stake in Hexacom but a decision is yet to be taken.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.