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New Telco Licencees To Share 50% Profit On Stake Sale

30 March, 2009

In a bid to further tighten the noose on new telecom licence holders, the Department of Telecommunications (DoT) will allow them to sell equity stake if they part with 50% of profits earned on stake sale. In what could be a major blow to the new Unified Access Service Licensees (UASL) who have recently sold stake to foreign telcos, DoT may impose this law with retrospective effect, reports Times of India.

This step comes after the Telecom Regulatory Authority of India (TRAI) has proposed a lock in period for promoter’s equity whose net-worth has been taken into consideration for determining the eligibility for grant of UAS license, for a period of three years from the effective date of license.

The DoT is now proposing that while half of the profit earned should be taken as reserve for the company and used for network expansion only. The other half should go to the licensor. These steps are being taken because DoT believes that it has granted licences at a subsidised price. Also not only the new operators, but existing transactions will also come under the scanner.

Some of the recent deals in the telecom space include Bahrain Telecom and Millennium Private Equity’s acquisitions of 49% stake in licence holder S Tel Ltd for $225 million. Others are Unitech selling a 67% stake in its telecom venture to Norway’s Telenor for $1.1 billion and UAE’s Etisalat buying 45% stake in India’s Swan Telecom for around $900 million.

 

 


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New Telco Licencees To Share 50% Profit On Stake Sale

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