BPL Communications licence application under scrutiny

BPL Communication’s (the Mumbai-based operator which was bought out by Essar Group) application for a pan India telecom licence has come under the scrutiny of the Department of Telecom for a possible violation of the cross holding norms with Essar’s equity in Vodafone Essar Ltd.

BPL’s applications were made in the name of Shipping Stop Dot Com in which BPL Communications holds about 74 per cent stake while the Ruias directly own 9.9 per cent stake through an Essar Group subsidiary. At the same time, the Ruias promoted Essar Group also holds 33 per cent stake in Vodafone Essar, which has presence in all the 22 circles for which BPL has also applied.

As per the cross holding norms stipulated in the unified access licence conditions, a single company or an individual cannot hold more than 10 per cent equity stake in two different companies in the same circle. The norms also say that promoter company or an individual may not hold even a single share in more than one company in the same circle. “Clause 1.4 (ii) of the unified access licence states that no single company/legal person, either directly or through its associates, shall have substantial equity holding in more than one licensee company in the same service area. Substantial equity means an equity of 10 per cent or more. Also a promoter company/legal person cannot have stakes in more than one licensee company for the same service area. We are going to scrutinize all applications including that of BPL to check if they are consistent with these norms,” said a senior DoT official.

When contacted an Essar Group spokesperson said, “The applications are fully compliant with the DoT norms.” Sources in Essar Group added that DoT norms did not apply to BPL since the Ruias had reduced their stake to less than 10 per cent stake in BPL. They also said that there was no common promoter company between Essar Vodafone and BPL and therefore there was no question of any violation.

However DoT officials said that they would ask the company to give details of the equity structure of Shipping Stop Dot Com including those held by BPL Communications and Capital Global before taking a decision on the application. Earlier a similar controversy had arisen when the Birla Group had alleged that Tata Group was violating cross holding norms by holding more than 33 per cent stake in Idea Cellular even as Tata Teleservices had rolled out a pan India mobile service.

GSM Subscriber Update

Bharti: The market leader Bharti registered a growth of 3% MoM (58.5% YoY) with a net addition of 1.75 mn (as against 1.70 mn in March 2007), gaining subscribers from the relatively less competitive 'C' circles of Assam (11.6%), North East (11.7%) and West Bengal (10.0%).

Reliance: Reliance, the other national player, registered no change in net additions at 4.37 mn. We believe Reliance may not have reported its numbers yet and that COAI would therefore have been forced to carry forward the same from March 2007.

Idea: Idea registered a strong percentage increase of 49.1% (MoM) to 0.55 mn particularly from Himachal Pradesh (26.8% MoM), Uttar Pradesh (E) (12.6%) and Rajasthan (11.6%). Given Idea's plans of further enhancing its presence across India, the positive trend in incremental subscriber base will play a critical role in determining its success.

BPL: BPL's net subscriber addition has been a poor 6,232 in absolute terms. It is in the sell-out phase, with only one remaining circle - Mumbai. Hence, it is most unlikely that BPL will invest more into the business, leading to continued poor subscriber additions.