The government on Thursday barred start-up telecom companies from selling any stake in their venture for at least three years from the date of issue of the Unified access service licence (UASL). In a partial relief to the new licensees, it also permitted raising of additional capital through issuing fresh equity shares.
While amending the UASL, the government has stated, ?There shall be a lock in-period for sale of equity of a person whose share capital is 10% or more in the UAS licensee company on the effective date of UAS licence and whose net worth has been taken into consideration for determining the eligibility for grant of UAS licence, till completion of three years from the effective date of the UAS licence or till fulfillment of all the rollout obligations under clause 34, whichever is earlier.? Also while allowing start-ups to raise money for rolling out networks through issue of fresh equity, the government has clearly said, ?However, such a person (on whom lock-in condition applies) shall not transfer in any manner such as sale or assignment of his share capital directly or indirectly to any other person during lock-in period.?
The government has also barred the declaration of dividend or special dividend during the lock in period. Further, it has clarified that the provision of the lock in period would not apply, in pursuance to enforcement of pledge by the lending financial institutions/banks in the event of defaults committed by the UASL company. The decision comes a year after the government was alleged for underselling of the UASL to a host of new players in a controversial manner especially when Swan Telecom and Unitech Wireless received astronomical valuations and diluted their stake in the start-ups to foreign players despite having invested miniscule capital.
The DoT reffered the matter to Trai, which recommended a blanket ban on promoters of new telecom licensees from selling their stake for a period of three years after getting the licence. It had also said in case a promoter wished to sell stake in the first three years, 50% of the transacted amount must be paid to the government while the remaining 50% must be invested back into the telecom company.
While recommending the same, Trai had acknowledged the new licences given by the DoT did not capture the then current market price for licences and spectrum. Further, the lock in period was recommended on circle basis and not on a pan-India basis. This meant an existing telecom operator, if granted a licence for a new circle, would also be covered by the regulation.