JT Mobiles has offered a 49 per cent equity holding of its wholly-owned subsidiary Evergrowth Telecom based in Punjab to the Essar group promoted Essar Investment.
The proposal, now under consideration with Department of Telecom (DoT), marks the first official admission from the company confirming dilution of equity of its 100 per cent subsidiary Evergrowth in favour of Essar group.
Evergrowth Telecom, was earlier in the eye of controversy following reports which suggested that DoT questioned its move to dilute Evergrowths stake upto 76 per cent to the Essar group. JTM had held that the promotion of Evergrowth as a 100 per cent subsidiary in Punjab circle was necessary due to its pre-occupation in Karnataka and AP circles.
However, both JTM and Essar group had earlier denied any move to enter into an equity arrangement in Evergrowth. If approved by Dot, this proposal will result in an equity sharing pattern of 51:49 between Evergrowth Telecom and Essars Investment, in the Punjab cellular circle. Essar group, which is already a basic telecom licencee in the Punjab circle, now will need to share its backbone network with JTM once DoT accepts Evergrowths dilution plan.
DoT is currently evaluating the proposal. Since it is now busy with basic licensing process, we hope to receive a positive response from it once it is over, sources said. Weve sought permission from the DoT that well not dilute our stake in Evergrowth below 24 per cent, they claimed. In its explanatory note to DoT, JTM is reported to have told the department of its inability to fully devote its attention to Punjab circle due to its preoccupation with the laying of 4000 km length backbone network in Karnataka and AP circles. This, according to it, necessitated forming a marketing arrangement with Essar group to handle its Punjab operation.
Ruia controlled Essar Telecom has licences to operate in Haryana, Rajasthan, Delhi and UP (East). It also holds the letter of intent for basic services in Punjab. Under the plan, JTM will make use of Essars brand name `Essar Cell phones in Punjab circle. This is necessary because it costs huge money to build a brand equity in cellular business, sources explained. Essar, on its part, will receive royalty fee from JTM for using its brand name. JTM has estimated that it will require Rs 350 crore over next three years to run its cellular licence operation in Punjab. Although, Punjab circle is still under `testing stage, JTM claimed it has already sold 6000 Essar handsets to potential subscribers.
