Boom 2: telecom tussles are here to stay | india | Hindustan Times
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Boom 2: telecom tussles are here to stay

india Updated: Jan 14, 2007 22:46 IST
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The hectic activity in the telecom sector over the last fortnight, on the sale of 67 per cent stake in Hutchison Essar held by the Hutchison Telecommunications International Ltd (HTIL), is reminiscent of the year 1992, when the government first brought about liberalisation in the telecom services sector.
 
Telecom majors along with private equity investors from across the world scrambled to bid for licences to operate cellular mobile, fixed and paging services in India. The HTIL stake going up for sale has brought a similar flood of interested parties back to India.
 
Sukh Ram, who was then Minister for Communications, recalled before Hindustan Times, "India was a big, untapped market then with just 1.5 per cent teledensity, a most attractive destination for investors. I made the first mobile phone call in India to Jyoti Basu, then chief minister of West Bengal. I remember predicting to him that cellular phones - which we called value added service - will bring about a major revolution."

Once again the telecom companies and private equity funds are showing renewed interest, "not just because of the huge growth in mobile phones  market, but due to the usage, which is the highest in the world," said Sukh Ram.
However, the Indian telecom sector has also witnessed permutations and combinations and alterations in licencing conditions during the last decade. It saw a slew of litigations between the government formed regulator Telecom Regulatory Authority of India (TRAI) and the operators, as also between the competing operators. Two National Telecom Policies were formulated, both born out of compulsions of technology and litigation rather than any proactive vision.
 
This did erode the confidence of investors. While Li Ka-shing will be the ultimate beneficiary from the rising valuation of his 67 per cent stake in Hutchison Essar, the competition could also open up a Pandora's Box, if litigations begin. The question of Essar's 'first right of refusal' whenever HTIL wants to sell its stake has already become a thorny issue. Essar is reported to have set up a legal team to look into the shareholder's agreement in the matter.
 
A senior analyst, who did not wish to be identified since he is part of the team advising one of the bidders said, "Litigations and regulatory issues could well mar the transition of this 67 per cent stake from one holder to another. There are plenty of examples of such tangles over mergers and acquisitions in the telecom sector in India in the last few years." 
 
The purchase will not be a cakewalk for any of the bidders - be it Vodafone, or Reliance Communications or the Hindujas or Essar. Ravi V Prasad, a senior telecom analyst said, "Reliance faces the maximum number of procedural and policy related obstacles, be it with the 10 per cent limitation on buying into rival networks, or the stock market regulations. Vodafone is making the right moves by getting the politicians from the United Kingdom to campaign for them."

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