Indian Operator at Risk of Losing Telecoms License

The telecoms license held by India's Loop Telecom may be at risk after the ministry of corporate affairs (MCA) has asked the communications ministry to investigate if the shareholders violate the law on cross company ownership.

Loop Telecom is controlled by the Essar Group, which also owns 33% of Vodafone Essar and is in legal dispute with Vodafone over its reported plans to use Loop Mobile to build another national mobile network. ZTE recently won a contract from Loop Mobile for a national network rollout - although no specific details were provided.

The MCA has ruled that while the Essar Group does not have a direct stake in Loop Mobile, it has funded the company via subsidiaries which it indirectly controls.

When contacted on the issues, the Loop Telecom spokesperson told The Economic Times, "The shareholding structure of Loop Telecom has been provided to the Department of Telecom at the time of issue of licence. The shareholding structure is fully compliant with relevant guidelines, and we would work with DoT in case they have any clarification."

"It would appear that through the funding of STPL by Essar Group, equity has been provided to BPL Communications, which is 48% owner of Loop Telecom. DoT may examine their policy and regulations for eligibility for grant of letter of Intent (LOI) to Loop Telecom for grant of UAS licence," the MCA added.

The rebranding of Mumbai based mobile network, BPL Mobile as Loop Mobile last month raised speculation that Essar Group is proceeding with its national network plans.

On the web: The Economic Times

Posted to the site on 28th April 2009