In a letter to Telecom Secretary Siddartha Behura, Loop Telecom said: "Since the relevant date (date of application), the indirect equity holding of (the) Essar Group in Loop Telecom Private Limited has at no point exceeded 9.99 per cent as permitted under the licensing guidelines."
When contacted, Loop Telecom officials neither denied nor confirmed the development.
The company, set to launch GSM mobile services in five to six circles by the end of this month, has expressed concerns that such reports, which seem to be motivated by competitive business interests, may adversely impact the rollout schedule as this causes uncertainty among vendors and financiers.
Loop's clarification comes after the Ministry of Corporate Affairs asked the DoT to examine the shareholding structure of the company in the wake of various financial transactions between the Essar Group and the holding companies of Loop Telecom.
The Ministry of Corporate Affairs had said that financial transactions between the Essar Group and the holding companies of Loop Telecom could imply that these transactions in some way enabled the Ruias to gain equity control in Loop and therefore resulted in a violation of licensing guidelines.
The company said in its letter that apart from an indirect equity exposure of less than 9.99 per cent by the Essar Group, the remaining equity interest was held by Loop's promoters, the Khaitan Group, through its investment/holding companies, including Santa Trading Private Ltd and BPL Communications.
Loop also clarified that in 2005-06 and 2006-07, Essar Group companies had subscribed to non-convertible debentures of Rs 1,592 crore (Rs 15.92 billion) in Santa Trading, which in turn (through its subsidiary BPL Communication) invested Rs 2,951 crore (Rs 29.51 billion) in debt securities of Essar Group companies.
As of relevant date (at the time of issuing licences), the Essar Group owed the Khaitans about Rs 1,359 crore. "Therefore, the question of any benefit flowing from (the) Essar Group to (the) Khaitan Group does not arise," the company said.
Loop Telecom claimed that the company has entered into network equipment contracts with leading international vendors, and signed haul transmission agreements and interconnect deals, and any delays due to such factors could render it unable to meet the licence rollout obligations and delay the launch of service.