Telecom Stake Sales Face Lock-in Block

Acting on the communications ministry’s proposal earlier this year, the government on Thursday imposed a three-year lock-in clause on stake sales by promoters and major shareholders of telecom companies.

The clause is aimed at preventing the promoters of telecos which acquired the licences and spectrum in early 2008 at rock-bottom prices from making unearned gains by selling stakes to foreign companies.

"There shall be a lock-in period for sale of equity of a person whose share capital is 10% or more," the government said in a statement. Companies can, however, sell new shares by way of private placement or public issues during the period.

However, the lock-in period clause will not impact the agreements already entered into by companies such as Swan, STel and Unitech.

The government also clarified while announcing the lock-in clause that it would not apply if telecom companies were to issue fresh share capital to investors and foreign telecom companies.