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Report: Datacom Stakeholders Might End Dispute; Has The Delay Helped?

Mahendra Nahata is selling his stake in Datacom to the Dhoots, reports Economic Times, ending a 15-month long dustup between the two stakeholders. The news has not been confirmed, and the promoters have not announced any developments to the stake settlement. According to sources quoted by ET, a token payment has been made, and money will be paid to Nahata in tranches. The Dhoot family owns Videcon, which is planning a foray into the DTH space and has set up an ecommerce website EDigiworld. Nahata in March denied news reports that he would sell his stake. Datacom has, however, hired Morgan Stanley to find a strategic partner.

We had read that this was on the anvil six months ago when the promoters had agreed to compromise by merging HFCL Infotel’s operations in Punjab circle with Datacom, and offloading its Rs. 4 billion debt to Datacom in exchange for Nahata’s 36 per cent equity stake.

Has The Delay Hurt Or Helped Datacom?

Datacom owns licences for 22 circles but has not commercially rolled out services. It has also not raised any international investment, and the other rookie players it started out with such as Shyam Sistema (now MTS), Loop Telecom and Unitech Wireless have already raised money. MTS and Loop Mobile have started expanding operations. The delay has hurt Datacin by turning off potential investors and reducing financial flexibility, but perhaps it has also helped tide over a difficult fundraising scenario. It may also be the case that valuations may have improved since the beginning of this year.

Policy changes have also aided the company – new FDI norms can be used to Datacom’s advantage. It has also benefited from the reduction of roll out obligations. With mobile number portability being rolled out, Datacom and other new telcos will find it easier to pull mobile users from incumbent players. We expect a crossing over to take place once MNP is introduced, as users can retain their mobile numbers on changing operators.

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The Datacom Dispute Timeline*:

June 2009: Reports that Nahata has accepted a token payment for sale of his 36% stake to the Dhoots

March 2009: Nahata denies plans to sell stake

Jan 2009: Dhoot and Nahata reportedly in talks to end feud

Oct 2008: Launch postponed to May 2009, CEO Ravi Sharma resigns. Raj Kumar Dhoot takes over, Nahata rebels against the posting.

August 2008: Nahata alleges that the Videocon group has violated banking and company law norms by passing off a Rs 1,000-crore loan from SBI as its own contribution to Datacom’s equity. Roll out postponed to December 2008.

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August 2008: Stake selling talks fail – Dhoot was ready to offer Nahata Rs 1,360 crore, but Nahata has asked for Rs 2,116 crore. Roll out plans get delayed.

June 2008: Legal battles begin. Nahata alleged that the Dhoots were reneging on the commitment made in the investment agreement and was dissatisfied with their running of the firm. Caveat filed against Nahata’s Jumbo Techno Services by Videocon. The operator still hoped to roll out services on August 15.

November, 2007: Jumbo Techno Solutions held 90% stake in Datacom & 10% with Oswal Fertilizers and Chemicals Ltd, which exited when Videocon bought 64% stake.

* based on reported news


Nahata Says He Is Not Planning To Exit Datacom
Datacom In Talks With Four Foreign Telecom Cos For Investment; Spectrum For New Telcos
New Telco Roundup: Datacom Problems, Orissa Ops; Unitech Spectrum Timeline

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