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Vodafone may be forced to sell its 4.4 per cent stake in Bharti Airtel if a proposal to scrap cross-holding norms in the telecom sector goes through.
The Telecom Ministry is looking to ban telecom companies from holding stake in more than one operating firm as part of its bid to clean up the sector.
The Ministry feels that existing rules, which permit a company to hold up to 10 per cent stake in multiple operating firms, has been misused in the past to create complex holding structures.
The change in rules has been mooted by Mr Sachin Pilot, Minister of State for Communications and IT, who wants the cross-holding norms scrapped under the new telecom policy. “The policy should prohibit equity holding or other financial interests of telecom companies in any other telecom company providing services in India,” Mr Pilot said in an internal note sent to the Department of Telecom.
The Minister added that telecom companies should be mandated to report their holding structure to Securities Exchange Board of India and also under the Companies Act.
Mr Pilot said that although the existing norms have safeguards built in, it has not deterred some companies from entering into financial arrangements to circumvent the conditions.
“Maintaining the status quo of the licences in this respect may allow individuals and entities to structure complex agreements which are against the spirit of the draft telecom policy,” Mr Pilot stated.
There are already allegations under investigation that telecom operators were holding stake in multiple operating firms through front companies.
For example, it has been alleged that Swan Telecom (now Etisalat DB) was a front of Reliance Communications and Loop Telecom had substantial stake owned by the Essar Group. Since licences of Swan Telecom and Loop Telecom have been cancelled by the Supreme Court, the immediate impact of the new proposal will be on the Vodafone stake in Bharti Airtel.
Vodafone owns 4.4 per cent stake in Airtel and 64 per cent stake in Vodafone India. While this is perfectly legal under existing rules, the UK firm will have to give up the Airtel stake if the new proposal is accepted.
tkt@thehindu.co.in
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