The Indian government is likely to allow the US-based operator AT&T to raise stake in its Indian unit to 98.67 per cent instead of 100 per cent owing to various gaps in its application filed with the Foreign Investment Promotion Board (FIPB).

Earlier, AT&T had sought FIPB’s approval to raise stake in its local subsidiary, AT&T Global Networks Services India Private Limited to 100 per cent. AT&T Global Networks provides long-distance telephony services to large enterprises in India, including bandwidth for carrying data traffic across multiple locations using a global network of terrestrial and under-sea cables.

At present, AT&T and its subsidiaries, including AT&T Global Network Holdings LLC, hold 74 per cent stake in AT&T Global Networks Services India, while the remaining 26 per cent stake is held by Mahindra Telecommunications Investment Private Limited.

AT&T’s move to increase stake in the long-distance telephony arm comes after the Government allowed 100 per cent foreign direct investment (FDI) in the telecom sector.

AT&T has approached FIPB to seek its approval to buy out Mahindra’s stake in the venture. In an application submitted to the board, AT&T has stated that the transaction has been divided into two tranches to comply with the Companies Act, 1956 and the Private Limited Company and Unlisted Public Company Rules, 1999, under which a company can buy back only 25 per cent of equity shares in a financial year.

However, the Department of Telecommunications (DoT) has expressed reservation in providing clearance to the second transaction because AT&T in its application has not explained how the balance 1.33 per cent will be transferred from Mahindra. The department has noted that AT&T in its application to FIPB has stated an appropriate methodology for transfer of shares, but the company has neither made the methodology clear nor the resulting FDI inflow. As a result, DoT has asked the FIPB to allow AT&T to initially increase its stake in the unit to 98.67 per cent.