Nov 8, 2008

Business - India;Raja favours lock-in for new telecom promoters

Stung by growing accusations, especially from the Left, that the government sold spectrum for second-generation (2G) licences cheaply, Union Minister for Communications and IT A Raja has directed the Telecom Commission to revise licence terms for new telecom operators.

The Commission, which will hold a meeting on Tuesday, is looking at imposing a promoter lock-in of three to five years for the eight new licence-holders. The moratorium will be imposed on promoters who have more than 10 per cent equity in the telecom company and whose net worth has been considered by the government when it issued the licences. Promoters, however, will be allowed to bring in a new partner by expanding the company’s equity.

New operators said they would be forced to seek court intervention since a lock-in would violate the licence agreement signed with the government. The agreement does not have a clause prohibiting a promoter from selling equity.

“You can’t just change the licence conditions whenever you feel like. We will surely challenge any decision by the government to prohibit the sale of promoter equity,” said the director of a leading new all-India licence holder.

Raja has come under fierce attack for selling scarce 2G spectrum for a song and allowing companies like Unitech Wireless and Swan Telecom to make a windfall by selling equity in their companies at huge valuations. A statement from the Left yesterday said the manner in which 2G spectrum was allocated is a big financial scam because the government has lost over Rs 60,000 crore in revenues.

Realtor Unitech paid around Rs 1,650 crore for an all-India licence in 22 circles and sold 60 per cent in the telecom venture to Norway-based Telenor for an enterprise value of Rs 11,620 crore, nearly six times the value paid for the spectrum.

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