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Home > India > Business > Business Headline > Report

Nahata, Dhoots in telecom feud

Surajeet Das Gupta in New Delhi | June 30, 2008 09:05 IST

A no-holds-barred boardroom battle has broken out between Mahendra Nahata and the Dhoots of Videocon [Get Quote], 36:64 partners in Datacom Solutions, a company which wants to launch mobile telephone services all over the country in a month-and-a-half.

Nahata, who holds the stake in Datacom through a closely-held company called Jumbo Techno Services, plans to take Videocon to the courts for violating the shareholders' agreement. Videocon, on its part, has filed caveats in various courts so that it is made party to any legal action initiated by Nahata.

A court battle could delay the launch of the service, slated for August 15, and also Datacom's plans to raise funds from strategic investors. The company has already held talks with Dubai-based Etisalat and Batelco of Bahrain, according to informed sources.

Jumbo Techno Services Director AK Jain told Business Standard: "To protect our legitimate rights in Datacom and to protect the shareholders' value, we might be left with no option but to take legal action." Venugopal Dhoot, the chairman of the Videocon group, was unavailable for comment.

Datacom had received a pan-Indian licence to run GSM-based mobile telephone services during the last round of spectrum allocation a few months ago. At that time, the company was fully owned by Nahata and some other investors. Subsequently, Videocon came in as a 64 per cent partner.

The Dhoot brothers have had an eye for a while on the world's fastest-growing telecom market and had also applied for spectrum. But their application reached the department of telecom after the cut-off date for new licences. So, they bought 64 per cent in Nahata's company through their flagship, Videocon.

Under the agreement, said sources in the know of the deal, the two partners agreed to subscribe to an initial equity capital of Rs 150 crore (Rs 1.5 billion). The Dhoots also agreed to put in further equity investments of around $1 billion (almost Rs 4,200 crore (Rs 42 billion) at current exchange rates), which would be required to set up the network infrastructure.

Sources in the other camp said that though Nahata was not required to make such further investment, his stake would remain intact at 36 per cent - a reward for getting the licence from the government.

Jumbo is learnt to have alleged that Videocon had conveyed to it that it would not bring in more equity but offer a loan to the company to finance the project. This was unacceptable to Jumbo. Consequently, this became a bone of contention between the two partners.

While Datacom is the maiden foray of Videcon in telecom, Nahata runs telecom equipment company HFCL and also operates fixed-line telephone services in Punjab. He has recently received a licence to also operate mobile services in the state.

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