Vodafone needs to sell Airtel stake to comply with new rules

New licence rules bar players from holding beneficial interest in competitors operating in the same service areas

Vodafone Group will be required to offload its indirect 4.4 per cent stake, worth $1 billion, in Bharti Airtel as new telecom licence rules bar telecom players from holding any beneficial interest in competitors operating in the same service areas.      
"In the event of holding/obtaining Access spectrum, no licensee or its promoter(s) directly or indirectly shall have any beneficial interest in another licensee company holding 'Access Spectrum' in the same service area," Unified Licence (UL) rules say.      

Vodafone declined to comment on the matter.      

In India, there are 22 services area, or circles, for 2G telecom services and both the companies operate in all the circles.      

Vodafone and Airtel currently operate on Unified Access Service Licence (UASL) licence, or 2G licences, under which telecom companies are permitted to hold stake up to 9.9 per cent in other firms.     

However, as per the new rules, telecom service providers operating under previous licences will have to migrate to new licences on expiry of their permits and sell stakes held by them in any rival within a year of getting UL.      

Vodafone's three permits, Delhi , Mumbai and Kolkata will expire in last quarter of 2014. The last 2G licence of Vodafone, issued for Madhya Pradesh area, is valid till 2027.      

Two permits of Airtel in Delhi  and Kolkata will also expire in November 2014, while some of its licences are valid up to 2024.      

Following failure of spectrum auction in November 2012 and March 2013, government came up with idea to bar companies from holding stake in each other to prevent any cartel formation.    

Vodafone in a letter to Department of Telecom had already expressed concern when UL norms was being firmed up.