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Stake sale: TRAI for 3-year lock-in

NEW DELHI: The Telecom Regulatory Authority of India has recommended a three-year lock-in period for stake sale that would be effective from the date of issue of licence, a move that will hit new telecom licensees. “The main objective of the Authority has been to recommend measures to block the unearned gains arising from transaction in stakes of promoters particularly when the value of spectrum is not getting correctly reflected in the entry fee,” TRAI said in a statement on Thursday.

“There should be a lock-in of the equity share capital of promoter(s), whose net-worth has been taken into consideration for determining the eligibility for grant of UAS licence, for a period of three years from the effective date of licence,” TRAI said in its recommendations. The move comes after some new telecom operators like Swan and Unitech made huge premium by selling stakes to foreign companies without having rolled out their services.

However, TRAI has permitted the promoters to sell their equity share even during the lock-in period with prior written approval of the Licensor (DoT) and on fulfilment of rollout obligations. “This is subject to the condition that 50 per cent of the profit earned on sale transaction of promoter(s) equity shall be retained in the business as a special reserve and utilised for telecom network expansion only, while the balance shall be transferred to the Licensor,” it added.

“In these recommendations, the attempt has been to maintain a level-playing field, ensure efficient utilisation of spectrum and transparency in the system while fostering growth in the telecom sector,” it said.

The new recommendations also makes it mandatory to disclose the details with complete break-up of 100 per cent of equity and net-worth of the licensee company, including that of promoters on the effective date of licence.

The licensee company has also been asked to inform the DoT of any change or dilution in the stake of promoters’ share in the total equity share capital within two days of such change taking place. A certificate from the company secretary and statutory auditors needs to be filed within 15 days from the date of transaction, it added.

On the issue of additional share capital, TRAI said: “The licensee companies/their holding companies by way of private placement/public issues should be permitted in accordance with statutory provisions (SEBI and Companies Act) subject to the condition that during the period coinciding with the lock-in period on sale of promoters equity, the equity of the promoter(s) shall not fall below 10 per cent of the total aggregate.”

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