Birla, Tata clash over Idea holding

Birlas want Tatas to reduce stake in Idea Cellular.

India's two top business houses appear headed for a showdown over their joint holding in Idea Cellular, with the AV Birla group urging the government to direct the Tatas to expeditiously reduce their stake in the company. But the Tatas want to take their own time to get "fair value."

Responding to a missive fired by the Birlas in the shape of a letter to the communications ministry for "swiftest" action in accordance with licence conditions, the Tata group said no regulatory compulsion should be imposed on it, as it "needed sufficient time to reduce its holding at a fair value".

Amid the confrontation between the two, AV Birla Group Chief Kumar Mangalam Birla met Communications and Information Technology Minister Dayanidhi Maran and Telecom Secretary JS Sarma last week.

When contacted, Sanjeev Aga, a director in Aditya Birla Nuvo Ltd (ABNL), termed as "courtesy call" the meeting between Birla and Maran, while declining to comment on the issues simmering between the Tatas and the Birla group, which holds over 50 per cent in Idea. In a letter to Sarma, the ABNL executive said, "We are compelled to seek your intervention to ensure swiftest adherence to licence conditions."

Quickly reacting to the Birlas' communication asking the telecom ministry to "determine the level of the Tata group's shareholding in Idea, whether below 10 per cent or nil", the Tatas shot off a letter to Sarma terming as "misleading and incorrect" the allegations levelled by ABNL against them.

When contacted, a Tata group executive said from Mumbai, "The Birlas have raised some issues and we have given an appropriate and correct answer," but did not elaborate.

Tata Industries Ltd Managing Director Kishore Chaukar, in a letter to Sarma, urged him "not to take cognisance of the said letter of ABNL" as the allegations made by the Birlas were incorrect and misleading.

The Birlas have cited the licence condition, wherein the company (in this case Idea Cellular) should not be subjected to competition from its own promoters and equity holders with impermissible holdings in another service provider in the same area.

Tata Teleservices and Idea Cellular happen to be operators in various telecom circles. Tata Teleservices offers CDMA-based mobile services while Idea Cellular offers GSM-based services.

The Tatas, however, contested the allegation saying the condition applied to only new applicants whereas Tata Teleservices was the one which switched over to the unified access service in step with the changes in the telecom policy. The Birla group holds 50.14 per cent in Idea Cellular and the Tatas 48.14 per cent.

According to the Birlas, "Despite requests, the Tata group has neither notified Idea nor provided transaction (by which it increased its stake acquiring AT&T holdings) or compliance details."

The Birlas want the Tatas to comply with licence conditions before March 3, 2006, a date announced by the department of telecom for all telecom providers to prove compliance with terms and conditions of licences.

The Tatas have clarified their position circle-wise and sought to establish that no clause of the licence has been violated by them.

Even otherwise, the Tatas have said, "Tata Industries Ltd has acted in utmost good faith and has expressed that it needs sufficient time to reduce its shareholding in Idea Cellular at a fair value."

"Tata Industries Ltd has recorded its commitment with the DoT of its own initiative and is pursuing the process of sale to bring its direct shareholding in Idea Cellular to below 10 per cent, without regulatory compulsion," Chauker said in the letter.

ABNL has, in its letter, deliberately confused conditions introduced in a pre-unified access service regime and post-regime to mislead the DoT to somehow or the other persuade it to take some action to force Tata Industries to totally divest its stake in Idea Cellular "under duress," he said.