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MSI to buy out stake in Indian joint venture

The decks have been cleared for international major Mobile Systems International's buyout of Bharti Telecom's stake in the joint venture MSI India.

T O D A Y

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At a recent meeting, the Foreign Investment Promotion Board whetted the UK company's plans. As per the structure of the buyout, Bharti is selling its 20 per cent holding in the company.

This sale would take MSI's holding up from 80 per cent to 100 per cent, making it a wholly owned subsidiary of the foreign company.

The joint venture came into being in June 1996 with a specific focus on providing telecom-related services.

According to the approved proposal the decision to take complete control of MSI India is part of the foreign company's "global strategy with specific focus towards the Indian subcontinent'' where it wishes to "strengthen its commitments towards the Indian telecom industry".

Sources said that the application had been submitted with a board resolution of the joint venture and consent letter from Bharti Telecom.

At present the foreign equity of 80 per cent amounts to an investment of Rs 8 million in the paid-up capital of Rs 10 million. With the acquisition, there would be no change in the equity capital of the company. However, sources said, the international major may infuse more funds later.

MSI has stated that the total transaction with Bharti Telecom would work out to an investment of $125,000 and no further funds would be put into the deal, sources said.

According to sources, given that the application had the support of a board resolution and a supporting letter from the Indian partner, it was clear that the transaction was not part of a hostile takeover.

Sources said that the Department of Telecommunications supported the proposal subject to the condition that the company shall confine itself to technical consultancy services.

It has also said that the company shall not undertake any telecom service providing activity.

This point was taken into consideration by the FIPB and imposed these conditions while recommending the case for a procedural clearance from Industry Minister Sikander Bakht.

The FIPB also recommended that the price of the shares should be decided as per the norms set by the Securities and Exchange Board of India and the Reserve Bank of India.

- Compiled from the Indian media

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