Search Now

Recommendations

Saturday, July 25, 2009

Govt imposes 3-year lock-in for new telcos


The Government imposed a three-year lock-in clause on stake sales by the promoters of telecom companies that were granted new Universal Access Service Licences (UASL) last year. The UASL holders will have a lock-in period of three years or till the fulfillment of rollout obligations, whichever is earlier, before promoters can sell their equity stake. The clause will be imposed on promoters with equity stake of 10% or more and whose net worth has been considered for determining the eligibility for grant of a UASL.

The Centre said this clause would not apply if telecom companies were to issue fresh share capital to investors and foreign telecom companies. Issue of additional equity shares by a UASL licensee through private placement or a public issue is permitted and is not subject to a lock-in. In case of fresh issuance within the lock-in period, declaration of dividend or special dividend shall not be permitted. The provision for lock-in period will not apply in pursuance with the enforcement of a pledge by lending financial institutions in the event of defaults committed by a UASL company.

The move will impact promoters of companies like Swan (Etisalat DB), Sistema Shyam, Datacom, STel, Loop and Unitech, which acquired Universal Access Service Licences in early 2008. But the lock-in will not impact the agreements already entered into by companies such as Swan, STel and Unitech. Swan had offloaded a 45% stake to UAE’s Etisalat for US$900mn, Unitech divested up to 67.25% in its telecom venture to Norway’s Telenor for US$1.1bn, while STel had sold a 49% stake to Bahrain’s Batelco for about US$225mn.