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Monday, March 26, 2007
MUMBAI: Indian authorities are looking into Hutchison Telecommunications' control of mobile phone venture Hutchison Essar to see if it breaks foreign ownership rules, the Economic Times newspaper said on Monday, quoting a central bank letter.
Foreign ownership of telecoms companies is capped at 74 per cent in India.
Hong Kong-based Hutchison Telecommunications International (HTIL) has agreed to sell its majority stake in Hutchison Essar, India's fourth-largest carrier, to Vodafone Group Plc. for $11.1 billion.
HTIL controlled 67 per cent of the joint venture, with India's Essar Group holding the rest.
The Economic Times said the Reserve Bank of India, in a March 20 letter to the Foreign Investment Promotion Board (FIPB), said ownership of a 12.26 per cent stake within HTIL's stake needed to be investigated.
HTIL's stake included shares held by local partners such as Hutchison Essar Chief Executive Asim Ghosh and investor Analjit Singh.
"Since the funding has been made at the instance of HTIL, it would imply that these persons would be holding shares in concert with HTIL and, if this is taken into account, the foreign holding in Hutchison Essar may breach the FDI cap of 74 per cent," the report quoted the central bank letter as saying.
"This aspect may be looked into by the FIPB," the report quoted the letter as saying.
Two-thirds of the Essar Group holding is through an offshore unit, which also counts as foreign ownership.
RBI officials were not available for comment.
Hutchison Telecom spokeswoman Mickey Shiu told Reuters the company had met all FDI compliance. "We have not breached any rules," she said.
The newspaper said the FIPB was yet to approve the deal with Vodafone, but the RBI was unlikely to scupper the deal.
© Reuters
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