Responding to an allegation at an arbitration hearing between Vodafone and the Essar Group, Essar has disclosed that BPL Mobile raised $80 million (around Rs. 357 crores), from a “Mauritius-based company owned by an international institutional fund” for 17 percent equity. The money was raised to finance BPLs expansion, and fund its stake in Loop Telecom. The Mauritius based company used by the fund to make the investment is reportedly called Gypsy Rover.

The context of this announcement is critical: Vodafone has won an order, freezing the shares of BPL and its subsidiary Loop Telecom. Loop has licenses for providing mobile services in 21 circles in India (BPL operates in Mumbai). Essar and Vodafone are partners in Vodafone-Essar; Voda has 67 percent stake in the co, while Essar has 33 percent. The bone of contention is BPL Mobile, in which Essar has a direct 9.9 percent stake, and controlling interested, allegedly, through related parties. Voda has alleged that Essar allowed an investment of Rs. 600 crores in BPL, which Essar has denied. Details of the alleged transactions here, at Business Standard.

So what impact does this have? The exact wording of the order (it’s not on the TDSAT site) is important. If just the shares are frozen, then Essar can still raise capital with a fresh issue of shares. Eitehr way, the dispute itself might put off potential investors like Norwegian telco Telenor, and Kuwaits Zain Telecom. Without the funds, this could well delay a rollout of Loop Telecom services.

Loop isn’t the only new telco to have run into trouble, though. Videocon and Mahendra Nahata have also reportedly been having issues over Datacom. Check out our New Telcos section.

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