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Hughes Networks may be locked-in in Maharashtra

Thomas K Thomas NEW DELHI, 28 April Hughes Networks, the promoters of Hughes Tele.com, does not have the option of quitting completely from its basic telephony business in Maharashtra in the wake of its ongoing merger talks with Tata Industries.

According to sources in the department of telecom, while Hughes can dilute its stake in the fixed-line telephone business, it will not be able to completely offload its stake because the migration package signed by the company in 1999 to move from a fixed licence fee regime to an annual revenue sharing, bars promoters exiting from the business before they complete at least 5 years of operations.

DoT sources pointed out that while there was nothing legally wrong in the ongoing merger talks between Hughes Networks System and Tata Industries, this lock-in period had to be adhered to.

The basic idea behind the lock-in was to ensure that a company did not opt out of the business after taking the benefits of the migration package.

When contacted Hughes spokesperson refused to comment on the matter due to non disclosure agreement signed with the Tata Group.

Sources also added that apart from the migration package, the Securities and Exchange Board of India code also bars promoters of any listed company to exit a business within 3 years of getting listed.

Hughes Tele.com had gone for an IPO in 2000 and therefore its promoters cannot exit the company before 2003. On Tuesday, the Tata Group had issued a statement announcing that Hughes Network Systems and Tata Industries have signed an MoU to discuss the possibilities of merging the basic telephony business of Hughes Tele.com and Tata Teleservices in Maharashtra and Andhra Pradesh.

While HNS holds 24.85 per cent stake, 24.3 per cent is held by Ispat Industries in Hughes Tele.com. Alltel holds 6.5 per cent and the remaining equity is held between the public, foreign financial investors and domestic financial institutions.

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