Lock-in clause can impact auction: AG
New Delhi: The Attorney General Goolam E Vahanavti has opined that the lock-in condition in telecom licences can effectively deter companies from participating in the spectrum auction, and suggested clarification in M&A policy sources said.
The Department of Telecom (DoT) had earlier sought legal opinion on final guidelines of mergers and acquisitions (M&A).
The lock-in clause prohibits companies from selling majority shares for three years after buying spectrum.
Sources said the Attorney General had opined that if the share of a transfer company which would technically cease to exist by reason of transfer, merger and amalgamation and would be replaced by a new shares in resultant company and if this could be held as violation of lock-in clause then it could effectively deter companies from participating in auction.
The AG has also suggested that the proper and effective way to encourage auction and at the same time maintain the purpose underlying the lock-in period would be to clarify the M&A policy, sources said.
"...If a licensee participates in an auction, and is consequently subject to a lock-in condition, then if such a licensee proposes to merge into another licensee the lock-in period would apply in respect of the new shares which would be issued in respect of the resultant company," the AG is believed to have said.
The final merger and acquisition (M&A) guidelines for the telecom sector are likely to be released
The Empowered Group of Ministers (EGoM) has already approved the guidelines but it may need a Cabinet approval post the views of AG.
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