The Telegraph
Since 1st March, 1999
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Hughes gains a toehold in Tata Tele

New Delhi, July 29: Hughes Electronics Corporation (HEC) of the US will pick up a significant stake in Tata Teleservices Ltd at an investment of Rs 213.46 crore.

Tata Teleservices Ltd offers basic fixed line services in Gujarat, Karnataka, Maharashtra, Andhra Pradesh, Tamil Nadu and Delhi.

Hughes Electronics today received an approval from the government to pick up redeemable preference shares from Tata Teleservices and two Tata entities — Calcutta-based Rithambara Agents Ltd and Goldman Agents Ltd.

Sources said the stake buyout was part of a quid pro quo deal that was reached last December when Hughes Network Systems, a Hughes Electronics subsidiary, sold its holding in Hughes to Tata Teleservices.

Huges provided basic telephony services in Maharashtra and Goa. It has since been renamed as Tata Teleservices (Maharashtra) Ltd.

Sources said, “When we (Hughes had signed an agreement with Tata Teleservices Ltd under which it would pick up our stake in the company, a clause was inserted that stipulated that, in return, Hughes would not take cash but would get shares in Tata Teleservices. Today’s approval is just a formal clearance.”

Hughes, earlier known as Hughes Ispat Ltd (HIL), was promoted as a joint venture between Hughes Network Systems (the HEC promoted company) and Ispat industries and affiliates.

The funds that Hughes Electronics will bring in will be used to beef up Tata Teleservices infrastructure network.

While clearing the proposal, department of telecommunications (DoT) had said, “As regards Ritambara Agents, though the transfer of shares would bring down the Indian holding from 75.18 per cent to 63.03 per cent, it would not still be within the stipulated FDI limit.”

Early this year, DoT had cleared the transfer of 12 per cent redeemable preference shares in Hughes issued by Tata Teleservices to Hughes Electronics Corporation.

This was subject to the condition that the deal would take into consideration the 49 per cent sectoral cap on foreign investment in telecom services and would not violate it.

The Hughes Electronics-Tata Teleservices deal was among a batch of proposals cleared by the Foreign Investment Promotion Board today that entailed an overall investment of Rs 263.78 crore.

In addition to the Rs 213. 46 crore Hughes Electronics proposal, the FIPB approved a proposal under which Koninklijke Philips of the Netherlands will pick up the outstanding 6.7 per cent stake in Philips India at a cost of Rs 43.50 crore, making it a fully-owned subsidiary.

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