Essar files for telecom licence under BPL's name

Essar is a 33% partner in the country's third largest telecom operator- Vodafone-Essar. It also owns or, at least, manages all of BPL Mumbai, which was the business they had bought from Rajeev Chandrasekhar. While it technically owns just 9.9% in BPL Mumbai, it actually manages all of that. The ownership of BPL Mumbai has been under contention between Vodafone and Essar and is currently in arbitration.

The twist to this story is that why is Essar, who is already a 33% partner in Vodafone-Essar, now applying for a separate nationwide license on its own. Will Vodafone have objections on this matter?

But there is a conflict clause, we understand, in the shareholder's agreement between Vodafone and Essar.

There is also a conflict when it comes to the regulatory aspect. How will the regulator look at this license application knowing fully well that Essar has just invested in Vodafone-Essar and now wants to try and build a separate business maybe through the BPL brand name. So, from both ends, this is going to be interesting, as to how Vodafone reacts to it and how the regulator assesses this application.

Analysts said that the regulator, at this point, will be a little constrained, because as per the regulation, which says that a company can hold a 9.9% or 10% stake in another telecom company, that would be treated as a financial investment.

Essar has been very clever. In the BPL Mumbai circle that they bought over; they technically hold only 9.9%. They have applied for licenses under the company BPL. So, really this will be seen as BPL's expansion plans and Essar will continue to hold 9.9% in it. Technically, though the other holding could be held by close associates of Essar and it may have a say in the management of BPL. Since, they hold only a financial stake, the regulator will have no choice but to give them the license, as this would be seen only as an expansion plan of an existing company. As a regulator, they will not be able to object, unless of course they can prove in some way that Essar has conflicting interests in both Vodafone and BPL.