Corporate affairs ministry approves equity sale lock-in proposals

8 Apr 2009

India’s Economic Times is reporting that the Ministry of Corporate Affairs has given the nod to plans by the Department of Telecommunications (DoT) to impose a three-year ban on equity sales in new operators. The DoT requested input from the ministry on the proposals after a recommendation from the law ministry. A final decision on the proposed legislation is now expected after 15 April, as the DoT is still awaiting feedback from the finance ministry.

The lock-in period is under consideration following a recommendation from the Telecoms Regulatory Authority of India (TRAI) last month. The move is believed to have been prompted by criticism of the government’s decision to award pan-India unified access service licences (UASLs) for INR16.51 billion (USD419 million) in January 2008, a price fixed back in 2001. If passed it is understood that the law will not affect telcos that issued fresh share capital to strategic domestic investors and foreign telcos. New players such as Swan Telecom and Unitech Wireless claim that deals with Etisalat and Telenor respectively were conducted as issues of fresh equity. However, the regulation may apply to operators including Vodafone Essar, Idea Cellular and Aircel, which were given additional licences to operate in new service areas at the beginning of last year. Under the proposals operators may be allowed to sell holdings during the three-year period subject to prior approval from the government and on fulfilment of rollout obligations.