Broadband Pacenet (India), a Mumbai based Internet Service Provider (ISP), is divesting 74 percent stake to UK based Private Equity firm Ashmore Investment Management, reports Indiantelevision. This follows unsuccessful negotiations between the ISP and the Zee Group, which fell through over differences in valuation. After changes in ISP policy, Broadband Pacenet can only divest 74 percent stake, and will be applying for Foreign Investment Promotion Board (FIPB) approval. Ashmore is also picking up 49 percent stake in Pacenet founder Jagjit Kohli’s cable TV venture - Digicable Network.

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Earlier, the Indian government had imposed an annual licence fee of 6 percent of ISP revenue, an entry fee of Rs. 20 lakh for national level ISPs, Rs. 10 lakh for State level ISPs, and done away with the licence for local level players. Hence, the ISP industry is rife for consolidation, so chances are that Pacenet will use the funds for acquiring smaller players. Another ISP - YOU Telecom - is looking to divest stake to fund a Rs. 300 crore expansion.