The department of telecommunications has opposed a proposal of the Singapore Technologies Telemedia and TM International consortium to acquire 47.7 per cent stake in Idea Cellular.
At a meeting of the Foreign Investment Promotion Board on Wednesday, the department's representatives said STT was wholly owned by Singapore-based Temasek Holdings.
Temasek also owns 63 per cent of Singapore Telecom, which is the largest shareholder in Bharti Tele-Ventures with a 28.22 per cent stake. Temasek also holds 5 per cent in Telekom Malaysia. TMI is the global investment arm of Telekom Malaysia.
At the meeting, the telecom department representatives said if the proposal went through, Tamasek would have a significant stake in two companies offering cellular services in eight common circles -- Delhi, Maharashtra, Andhra Pradesh, Gujarat, Kerala, Uttar Pradesh-West, Haryana and Madhya Pradesh.
Although several ministries were backing Idea's proposal, the telecom department's objections resulted in the FIPB deferring the proposal.
To discuss the matter, Tata group and AV Birla group executives today met finance ministry officials. The details of what transpired at the meeting were, however, not known.
If the proposal is cleared by the FIPB, the Tata group and the AV Birla group will get to hold 26.3 per cent and 24.7 per cent, respectively, in Idea Cellular.
A spokesperson for the STT and TMI consortium said the government had sought certain clarifications. "This (clarifications) has been a continuous process. Our legal advisers have been in constant touch with the government. This will continue to happen until there is clarity on the clauses relating to FDI in telecom," the spokesperson said.
The government is working on the guidelines for permitting 74 per cent foreign investment in telecom.
In December 2004, the STT and TMI consortium had signed a deal to acquire 47.7 per cent stake in Idea Cellular at an estimated cost of $390 million. If the deal goes through, STT will become the single-largest shareholder in Idea with an effective 28.62 per cent holding.
As per the deal, the consortium will acquire Cingular Wireless' entire stake in Idea. Cingular is an AT&T affiliate.
