R BalashankarNEW DELHI, Oct 6: The Telecom Commission has deferred a decision on Hughes Ispat's request for floating two independent subsidiaries to operate basic services in Karnataka and Maharashtra. The commission, which had earlier rejected the request has at its meeting on October 3, agreed to review the whole matter afresh in the context of the consortium signing the licence agreement for the Maharashtra circle.

The decision to review the whole matter was taken on the assumption that for operational and financial reasons, the floating of two separate companies might become inevitable for the group. Industry sources said that there was no unanimity on the issue as some members felt that allowing changes in the terms of the licence at this stage will open up a pandora's box. There are also other requests pending with the commission for change of partners and company holdings. As per tender conditions, licence is not transferable to a third party directly or indirectly.

Any change in the composition of the licencee should be with the prior approval of DoT. Sources said that the licensor (here DoT), while approving such changes in the equity structure has to ensure that no one company or legal person is controlling interest in more than one Indian company, which have been licenced to provide the service. The commission's decision to review the matter afresh is significant in the new context. It is eager to make as many licence holders sign the agreement as possible and start basic service operations in their respective circles.

In the case of Hughes Ispat, the condition is standing in the way of it signing the agreement for Karnataka as well. The document says that any change in the equity structure of the licencee duly intimated to the licensor, shall be permissible among other things subject to the following condition: The shareholding of a foreign promoter whose net worth or experience or both have been taken into consideration for determining the eligibility of the bidder company must continue to have a shareholding of not less than 10 per cent for at least 5 years from the date of issue of licence.

DoT sources add that the shareholding of an Indian promoter must continue to be not less than 10 per cent or the equity holding at the time of bidding, whichever is lower, for the first 5 years from the date of issue of licence.

The commission must also ensure that monopoly conditions do not develop. The Telecom Commission has so far maintained that the issue of floating two independent subsidiaries have to be totally delinked from the signing of licence. This is because it involves a number of legal implications including the replacement of foreign and Indian partners, their networth and experience, which were taken into consideration while awarding the award of licence to them.

DoT's analysis of the issue in a document presented to the Telecom Commission points out that even the tender document does not provide for such an evantuality, though it provides for replacement of partners within certain limitations. "Past experience on this subject shows that even with limited conditional acceptance of operation of services without any change or transfer of licences, the operators have attempted to sell their licence to other parties. Thus, even if agreed in good faith this might lead to legal complications and therefore this issue may be considered separately without linking with the signing of the licence agreement".

The commission has taken the view that in case Hughes Ispat is not able to sign the licence in the name of the present bidder company, it will be very difficult to agree to transfer the same at this stage to another company about whose constitution and liabilities sufficient inputs are not available at present.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.