New Delhi: Months after Vodafone Group Plc. bought control of Hutchison Essar Ltd, which has since been renamed Vodafone Essar Ltd, the British firm is headed for a spat with its Indian partner, the Essar Group.
The disagreement comes over Essar group company BPL Mobile Communications Ltd’s move to apply for independent telecom licences across the country last week.
On Tuesday, the Cellular Operators’ Association of India (COAI) pressed hard for an enquiry into the ownership of new licence applicants, immediately after Vodafone Essar, a key member of the grouping, lobbied for a strong response to the department of telecom’s plans for new cellular licences, two members of the trade body said. The members did not wish to be identified. Asim Ghosh, chief executive officer of Vodafone Essar, declined to comment on the issue.
“A promoter company cannot have any stake, whether direct or indirect, in more than one licensee providing the same service in the same service area,” COAI said in a letter to DoT secretary Dinesh Mathur. “Licence conditions cannot be circumvented by means of separate corporate personalities of individual members.”
Essar, a 33% owner of Vodafone Essar, is also the promoter of the Mumbai phone operator BPL Mobile. If BPL Mobile gets licences across India, then Essar would end up being promoter of two telecom companies in the same licensed areas, which is disallowed under Indian telecom rules.
The Ruia family-run Essar dismissed the idea saying the law only bars a stake of more than 10% in two companies in the same licensed area. “We have a 33% stake in Vodafone Essar and only a 9.9% stake in (BPL Mobile). So where does the violation arise?,” said Essar spokesman Manish Kedia.
The application for the 21 new licences was not made in the name of BPL Mobile, but a subsidiary called Shippingstop.com. BPL Mobile owns 51.24% of shippingstop.com; the rest is held by a former holding firm of BPL Mobile, BPL Communications Ltd.
The Essar Group will violate cross-holding norms if it owns more than 10% of the second company, BPL Communications Ltd, but details on this were not available.
The Essar group had, in 2005, bought a controlling stake in BPL Communications from Rajeev Chandrasekhar and a group of investors, who controlled 64% of the company. Kedia declined details of the present shareholding of BPL Communications. Indian telecom rules do not ask for details of the ownership of the entities that own stakes in a licence applicant.
A regulatory expert who did not wish to be identified said this made it possible for companies already present in a circle to apply for new licences by floating units. Swan Telecom Pvt. Ltd and Cheetah Corporate Services Ltd, to whom wireless operator Reliance Communications Ltd has loaned money, are also among the applicants for licences.