15 Jun 2009, 0040 hrs IST, Chaitali Chakravarty & Joji Thomas Philip, ET Bureau
NEW DELHI: Mahendra Nahata of Himachal Futuristic Communications (HFCL) has finally agreed to sell his 36% stake in telecom service provider Datacom Solutions to the Dhoots of the Videocon Group to end a year-long corporate battle that had spilt over to lenders, regulators and even potential foreign investors, two people familiar with the negotiations said.
The Dhoot family, which owns a 64% in Datacom, is already negotiating with a European company to pick up a strategic stake in the company to bankroll its pan-India rollout plans, a person familiar with the settlement said on condition of anonymity.
While Mr Nahata’s 36% stake is valued at around $300 million (about Rs 1,422 crore), the HFCL chairman will not get this payment immediately, top executives said. As of now, the Dhoots had paid Mr Nahata a ‘token payment’ and the remaining would be paid in tranches, they added.
Datacom, which had got licences to offer telecom services in all circles in India except Punjab early last year, has yet to start operations mostly due to the standoff between its two partners.
Both Mr Nahata and Mr Dhoot denied that any such deal has taken place.
Mr Nahata said that talks of any settlement between the two partners of Datacom were baseless, adding that he would continue to remain a stakeholder in the telco. Similarly, Videocon group chairman VN Dhoot, in reply to an email query, said: “There is no question of shareholding changes or settlements or payouts between the two parties.”
A person familiar with the deal said that it is likely to involve a merger of HFCL Infotel’s telecom operations in Punjab with Datacom.
But Mr Nahata will not get any additional cash consideration for HFCL Infotel, as its debt of more than Rs 400 crore will be transferred to the books of Datacom.
Mr Dhoot denied this too. “It is denied that any deal involving HFCL Infotel’s telecom operations in Punjab being merged with Datacom has taken place with Mr Mahendra Nahata,” he said.
He said Datacom has engaged Morgan Stanley to find a strategic partner, but refused to name any likely foreign partner due to the non-disclosure clause with Morgan Stanley.
The negotiations between Mr Nahata and the Dhoots had been deadlocked for close to 15 months with Mr Nahata demanding Rs 2,116 crore for his stake.
Last year, he had rejected an offer by the Dhoots to buy him out for Rs 1,360 crore. The valuations of telecom companies, which got licences last year, have crashed over the past nine months.
Datacom, which commanded a valuation of nearly $3 billion in early 2008, is now valued by analysts at around $1 billion. It had announced that it would begin operations in Chennai by August 2008, but the deadline was postponed to December 2008.
The company failed to meet this too. The standoff between the partners had also resulted in several potential international investors refusing to buy into the company.
UAE’s Etisalat held several rounds of talks with Datacom, but eventually picked up 45% stake in another new telco Swan for $900 million.
Some foreign telcos had even set a pre-condition that they would only invest in Datacom after both the warring stakeholders exit the firm.
The foreign telcos then wanted to bring in their own Indian partner to hold 26% in the telco. Indian regulations allow 74% foreign direct investment in the telecom sector.