TRAI backs DoT’s plans to restrict stake sales in new licensees

13 Mar 2009

The Economic Times is reporting that the Telecoms Regulatory Authority of India (TRAI) has backed proposals by the Department of Telecommunications (DoT) to impose a three-year lock-in period on stake sales for new licensees. The decision is also expected to affect owners of new players that acquired telecom licences in early 2008, as well as applying to new licences that were awarded to established cellcos, including Vodafone Essar, Idea Cellular and Aircel. Under the proposals telcos may still be permitted to sell holdings within the three-year lock-in period, although it is understood that any sale would first have to be approved by the government, and could only come after the operator had fulfilled any rollout obligations tied to the concession. On top of obtaining permission for any sale, the TRAI has also added a clause that would see 50% of the profits from any such early sale shared with the government; the remaining 50% would be compulsorily invested in expansion of the telcos infrastructure.

The move comes following criticism levelled against the DoT after a string of high profile stake sales for significantly higher sums than the cost of licences issued to new players in January 2008. Those operators which successfully won concessions at that time each paid INR16.51 billion (USD420 million). However, Swan Telecom subsequently sold a 45% stake to Etisalat of the UAE for USD900 million in September 2008, just nine months after its licence was awarded. Similarly, Norwegian telecoms group Telenor paid approximately USD1.1 billion for a 60% stake in Unitech Wireless in October that year.



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