Decoding the governments defence of UASL licensee windfall
Time and again, the government goes out of its way in advancing arguments in favour of the big licensees (UASL – Universal licensees) such as Swan and Unitech. Most Indians fail to understand why the government has to step in and bat for them.
The more I follow this story, the more I feel that Mr Raja of the DMK must not be the only ones investigated. Mr Raja clearly mentions that Mr Chidambaram and the PM were appraised at every step. Mr Raja appears to have appraised the former FM at various stages. There have been no rebuttal from the either the former FM or the PM, so we have to assume what he is saying is true.
How would you justify the stake sale by Swan and Unitech soon after getting licence?
As telecom minister, I have to ensure that the licences are issued in accordance with NTP99) and recommendations of TRAI.
After issuance of licence, dilution of a company or offloading of shares is not in my domain. However, when there was a hue and cry that there was a windfall gain for some companies. After discussions, the then Finance Minister P Chidambaram clarified the position to the Prime Minister — in front of me. He said that it was not sale of equity by promoters. He said that valuations of companies reflected the “post money” invested in it, not just the value of licence or spectrum.
Source (emp added) : HT
Before we get into what “post money” is, lets lay out the basic facts.
The two UASL winners Swan and Unitech did not have any assets nor significant liabilities other than the license. If nothing else, this makes working out their valuations much easier.
Here is a good article that explains Joint Venture valuation in this context :
To illustrate the point let us look at the Unitech-Telenor deal. It is reported that Telenor is paying Rs 6,120 crore for 60 per cent stake in the JV. What it means is that Telenor will be parting with 40 per cent ownership of this amount for gaining 60 per cent interest in the assets and liabilities of the company.
Assuming that the JV company doesn’t have any other assets/liabilities other than licence, it means Telenor is paying Rs 2,448 crore (40 per cent of Rs 6,120) for 60 per cent ownership of telecom licence. This value of Rs 2,448 crore for 60 per cent ownership represents enterprise value of Rs 4,080 crore for the licence for which Unitech paid only Rs 1,650 crore.
Source : Business Line
Does the erstwhile FM Mr Chidambaram’s defence of the windfall beneficiaries in front of the Prime Minister hold water ?
Singh once again said Naxalism was the “biggest internal security problem” facing India. The Centre and state governments will have to take “all types of steps” to control the menace, he said.
“Law and order machinery will have to be strengthened and with that we’ll have to take steps to do away with the economic and social causes, which increase alienation.”
Source : Topnews
Corruption is a more fundamental problem than naxalism.