Vodafone has complained to market regulator SEBI and the Bombay Stock Exchange (BSE) about its partner Essar’s plans to transfer 11% stake to another listed group firm stating that it was not disclosed by the Indian partner.
According to Vodafone, it has written to both BSE and SEBI to express its concerns regarding reverse listing of Essar Telecommunications Holdings Pvt Ltd into India Securities Ltd and has asked for the matter to be examined.
Vodafone had acquired nearly 67% stake in 2007 while Essar have little over 33% equity in the joint venture.
India Securities Ltd (ISL) is a group firm of Essar and is listed on the bourses. Transfer of 11 per cent stake held by Essar Telecommunications Holdings to ISL would allow shareholders of ISL to participate in Vodafone-Essar.
Essar is doing so to get to know the fair (market) value of its 33.02% stake, for which the company has the right to exercise the put option, a contract that gives the seller the right to sell a specified quantity of securities at an agreed price within a specified time period.
According to Vodafone, there has been no disclosure to the shareholders of ISL on Vodafone Essar, which would become a substantial asset of ISL. Therefore, the investors in ISL have no basis on which to form a valuation judgment.
The Department of Telecommunications (DoT) is likely to impose huge penalties on telecom firms that have failed to meet their launch obligations rather than cancel their licenses.
The Telecom Regulatory Authority of India has also suggested a fine or a levy on telcos for failure to meet rollout obligations as an option to cancelling their licenses.
Meanwhile, speculations have spread about some of the operators benefiting from the license being asked to be cancelled by TRAI. The focus now is on who would benefit if the 150 MHZ worth spectrum is returned to the government.
The biggies of the industry seem to be gaining a lot on the BSE as Bharti gaining 4%, Idea Cellular rising 4% and Tata Communications gaining 3%.
According to Ajai Puri, chief executive officer of the company’s digital TV services business, Bharti has signed up 3.8 million customers to gain a 14% market share. Industry wide, as many as 12 million people may take up satellite television this year.
A price war was subsequently the entry of new players like DoCoMo and Telenor pushed mobile-phone call rates down to as low as a penny a minute, damping earnings growth at Bharti, and prompting the carrier to seek new revenue opportunities. The company is offering a pay-per-view TV service, where new Bollywood movies are made available to rural customers within three weeks of their release in city cinemas.
As per Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai, the potential is very, very large. But it’s going to entail huge upfront investments and the ability to sustain losses for several years to make a mark in this business, it is ultra competitive.
Bharti, which started its direct-to-home TV service in October 2008, lags behind Dish TV, billionaire Kalanithi Maran’s Sun TV Network and Tata Sky, a venture between India’s Tata Group and Rupert Murdoch’s Star Group. Still, it directs its nearest wireless rival Reliance Communications Ltd., which started its satellite TV business the same year as Bharti, and has about 3 million customers.
According to data from the nation’s telecommunication regulator, Satellite television subscribers in India rushed to 21.3 million in year ended March 31 from 13.1 million a year earlier. With only a third of the nation’s 240 million households having access to cable television, Bharti aims to leverage its wireless-services retail network in towns and villages to increase its share of direct-to-home accounts.
According to Mr Puri, the market is poised for rapid growth. The company is positioned very well within the market to take a large portion of that growth. Airtel has mobile distribution through 1.5 million-1.6 million retailers. These retailers are also available to our DTH platform for servicing customers. Bharti shares rose 2.34% to close at US$8.014 on the Bombay Stock Exchange on Monday.