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Raja wants stricter laws to stop outright sale of licences

Raja wants stricter laws to stop outright sale of licences
PTI
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First Published: Wed, Nov 05 2008. 05 42 PM IST
Updated: Wed, Nov 05 2008. 05 42 PM IST
New Delhi: Under attack over alleged undervaluation of 2G spectrum leading to controversy over stake sales of Swan and Unitech, Telecom Minister A. Raja Wednesday directed DoT to examine the possibility of strengthening laws to rule out any direct sale of licences by telecom companies.
“In order to remove suspicion, Telecom Commission may deliberate over this issue to restrict outright sale of licences and selling of stakes by promoters to second parties for money,” Raja said in a letter to Telecom Secretary Sidhharth Behura, who is also the Telecom Commission Chairman.
Senior DoT officials said the minister’s direction spells abundant caution to plug loophole in the laws, if any. At present, outright sales are not allowed. But Indian licencees can dilute equity stake to foreign companies, up to 74% of foreign direct investment, which is not same as direct sale or trade of licences.
“However, there is a perception that these (the stake sale by Unitech and Swan Telecom) are outright sales and the minister wants to distinguish between such a sale and dilution of shares, which is permissible. Any necessary amendment in the licence would be carried out if it is required to restrict outright sale,” an official said.
There are a lot of misgivings and misleading views that the issuance of new licences were spectrum allocation specially in case of Swan Telecom and Unitech Wireless, as these companies allegedly got unlawful enrichments,“ said the official.
In the meeting with Prime Minister Manmohan Singh Tuesday, Finance Minister P. Chidambaram clarified that dilution of shares to attract foreign investment for business expansion did not amount to sale of licence, and as such these companies did their share dilution as per corporate laws,” the minister said in the letter.
Telecom Commission will send a clear message that outright sale is not possible. Since some doubts are coming frequently, the ministry wants explicit clarity on this, according to another official said.
Recently, Unitech sold 60% in its telecom arm to Norway’s Telenor for Rs6,120 crore and earlier Swan had sold 45% stake to Etisalat for $900 million. Both these deals raised the issued of loss of revenue to the Government on the argument that by just paying up to Rs1,651 crore as licence fees, the company had made fortunes by selling stakes.
DoT had earlier stated that the valuations are enterprise values not just spectrums.
Telecom Commission will send a clear message that outright sale is not possible. Since some doubts are coming frequently, the ministry wants explicit clarity on this, according to another official said.
Recently, Unitech sold 60% in its telecom arm to Norway’s Telenor for Rs 6,120 crore and earlier Swan had sold 45% stake to Etisalat for USD 900 million. Both these deals raised the issued of loss of revenue to the government on the argument that by just paying up to Rs1,651 crore as licence fees, the company had made fortunes by selling stakes.
DoT had earlier stated the valuations are enterprise values not just spectrums.
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First Published: Wed, Nov 05 2008. 05 42 PM IST