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DoT against lock-in for promoters equity; mergers on cards

DoT against lock-in for promoters equity; mergers on cards
PTI
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First Published: Sun, May 31 2009. 11 32 AM IST
Updated: Sun, May 31 2009. 11 32 AM IST
New Delhi: The fast growing telecom sector is set to witness another round of mergers and acquisitions with the DoT recommending against lock-in of promoters equity, saying this would only hamper growth and competition.
The committee for finalising the views of the Department of Telecom (DoT) on lock-in period for promoters’ equity is understood to have submitted its report in this regard.
“Despite exponential growth and intense competition, the telecom industry even after 15 years of operation is cash flow negative. Capital efficiency of the sector is an important pre-requisite for achieving consumer interest in a sustainable manner.
“Further growth and coverage of the rural and remote areas would entail huge investments. Against the backdrop of economic downturn, it is a challenge to raise investible funds, and there is a need for valuable foreign investments,” the committee said.
“The lock-in period will only hamper growth of telecom market and competition,” it added.
The issue of lock-in period was raised as some of the new players inducted new partners to garner funds for rolling out network across the nation.
If accepted, this would lead to consolidation of telecom industry and according to analysts the business of mobile services may not be commercially viable in case there are more than four or five operators in a circle.
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First Published: Sun, May 31 2009. 11 32 AM IST
More Topics: Telecom | Mergers | DoT | Lock-in period | Promoters |