The department of telecommunications (DoT) has sought clarifications from its wireless planning wing on whether a foreign company that won broadband wireless access spectrum in the 2010 auctions and subsequently formed an Indian JV can reduce its equity stake in the company to below 26%.
While auction rules are not specific on this issue, any re-think on the government’s part could put a spanner in the Qualcomm-Airtel deal, in which Bharti plans to increase its stake to 93.5%, thereby reducing the US chipmaker’s shareholding to 6.5%.
According to the 2010 auction rules, foreign applicants were allowed to participate in the spectrum sale directly and then apply for (or acquire) an internet service provider or unified access service licence through an Indian company, where it (foreign player) holds at least 26% stake.
However, the rules do not specify whether the condition of minimum holding of 26% of equity by successful bidder in the licence holder (JV with the Indian firm) is applicable only till the time of acquiring the permit, or if it has to be maintained throughout the period the Jv firm holds the broadband spectrum.
US-based Qualcomm had bought BWA permits in four circles in 2010 through an auction and then brought onboard Tulip Telecom and Global Holdings to own 26% of the entities, in accordance with the then FDI investment rules, which allowed foreign companies to invest a maximum of 74%.
Subsequently, it sold 49% in May last year to Bharti Airtel for $165 million with the intent of completely selling out by 2014-end. In June, Bharti increased its stake in Qulacomm’s BWA business ? Wireless Business Services ? by 2%. Bharti now plans to increase its holding in the company to 93.45%.
At the time of buying the BWA spectrum, Qualcomm had announced its plans to exit the venture after creating a long-term evolution, or LTE, network to roll out broadband wireless access services. LTE is a technology that offers high speed broadband and high-end multimedia services.
?There is no specific provision of a ‘lock-in’ period in the notice inviting application (auction rules) for the successful bidder,? said a DoT note to its wireless planning wing.
The note added that NIA, however, mentions both successful bidder and the licence holder shall be jointly and severally liable for the performance of the bid obligations, including rollout timeline.
If a successful bidder has to hold 26% only till the time of acquiring the permit, it cannot be made liable for the performance of the bid obligations, states the DoT note, adding that if the successful bidder has to be made liable for meeting bid obligations then it cannot be allowed to shed equity holding below 26% in the BWA entity.
In this context, DoT has sought options from the WPC considering ?100% FDI has been allowed in the telecom sector and investment promotion?.