Finally, The Department of Telecom has given its approval to divest the 30% stake held by Telecommunications Consultant of India Ltd (TCIL) in Bharti Hexacom, a mobile services company in Rajasthan. The stake sale has been in limbo for three years now. The Government had so far taken a stance not to divest State-owned TCIL's stake. The decision to approve the stake sale was taken at a meeting of the Telecom Commission, the highest authority in DoT, on August 21. DoT will now to take the proposal to the Union Cabinet for approval.

Considering that telecom sector is witnessing an intense competition and going through a phase of consolidation, especially with the opening up of internet phone, ARPU (Average Revenue Per user) is expected to decline further for telecom companies. This may adversly impact the bottom line of the telecom majors. In view of the above, it is not prudent for the Government to retain stakes in marginal telecom companies. DOT is also giving new GSM licences to telecom players in all circles, which will further intensify the competition.

TCIL's proposal to sell its stake of 30% seems to be a fund raising exercise, the receipts from which may be used for restructuring of TCIL, and may be for foray in road construction activity.

Bharti already owns about 70% stake in Hexacom after it had bought out majority shares from Shyam Telecom. Bharti had paid about Rs 430 crore for buying out Shyam's stake in 2004. If TCIL sells its stake, Bharti Airtel will have the first right of refusal. Bharti had earlier expressed interest in acquiring the stake but could not do so without Government approval.

However since Bharti is already holding a majority stake (70%) in Hexacom, they may not be willing to offer the claimed sum of Rs 2,000 crore for buying 30% stake. In view of this, the valuation for 30% stake for as much as Rs 2,000 crore may not materialise, and government may have to settle for a lesser amount.

Apart from Hexacom, Government is also planning to sell stake in BSNL, which is being met with stiff resistance from Unions. In an election year, government cannot antagonise a pan India PSU,  hence going slow. Media reports also suggest that Government is "not in a hurry" to do the IPO for divesting 10% stake in telecom behemoth. Government is looking for stock market to improve before they would launch IPO for BSNL.


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