DoT clean chit to Vodafone, says only a licensing issue

NEW DELHI: In a move that will spell partial relief to UK-based cellular major Vodafone, the Department of Telecom (DoT) in its second report to Foreign Investment Promotion Board (FIPB) has said that Vodafone’s case had been examined from the licensing point of view and it was in compliance with licence conditions.

The DoT report does not refer to any FDI breach by the minority shareholders in Hutchison-Essar, a top government source told ET. The DoT has also submitted changes in Hutchison-Essar’s (HEL) shareholdings over the last 10 years to the FIPB.

Responding to an ET query, a communications ministry official in a written reply said: “DoT had examined Vodafone case from licensing conditions point of view and given its comments (to the FIPB).” On the specific issue on whether HEL MD Asim Ghosh’s and Max India chairman Analjit Singh’s combined shareholding of 12.26% breached the country’s FDI norms, the official reply said: “No such comments had been given by DoT.”

On whether Mr Ghosh’s and Mr Singh’s shareholding amounted to violations of the Foreign Exchange Management Act, the DoT in its reply has said that the FIPB and RBI were the competent authorities to look into this.

At the same time, the DoT also added that it subscribed to the National Security Council’s recommendations that Vodafone be asked to disclose all its global operations as this provision was applied to every company with regard to security concerns.

Last month, Hong Kong Hutchison Telecommunications International Ltd (HTIL) had sold majority stake in HEL to Britain’s Vodafone Group Plc for $11.1 billion. The FIPB has deferred clearance of Vodafone’s acquisition of Hutch-Essar (HEL) twice on the grounds that it required additional information from all stakeholders on the shareholding of the company.

The board has not been able to come to a conclusion even after hearing representatives from HTIL, HEL and Vodafone who made presentations to its officials, explaining the equity structure of the company.

This is because, the RBI, in its reply to the finance ministry’s query, had said that the 12.26% shareholding of Mr Ghosh and Mr Singh in HEL amounted to violations of the Foreign Exchange Management Act and the country’s FDI norms. Following this, the finance ministry has sought the law ministry’s opinion on the issue. The law ministry is slated to submit its report within the next couple of days, sources added.

Last week, both Vodafone CEO Arun Sarin and HTIL chief Dennis Liu had told the media that the companies were in full compliance with FDI norms of India and it would not take much time for the sale to be concluded.

joji.philip@timesgroup.com