100 per cent FDI in Approved in Telecom: Proper Regulations Are Yet to Come

Indian telecom sector which is under the huge Rs 251,000 crore debt have just got a breather as Telecom Commission approved the proposal of foreign direct investment cap to 100% from the present 74 per cent. Commerce and industry minister Anand Sharma announced this after a meeting of the Union Cabinet.

FDI in Telecom India
At present 74% FDI is allowed in telecom, of which 49% directly and beyond that Foreign Investment Promotion Board (FIPB) approves the permission.

Government believes that it will open the gate of investment from global firms across the globe and ultimately the once-fastest-growing but now huge debt-laden sector will be relieved in coming days.

With this move, many telecom major who are running business in the country with major dispute with their Indian partners may buy out their partners’ stake in the venture and can kickstart their Indian operations in a new mode. Telenor (operates under Uninor brand), Reliance Communications, Maxis (have majority stakes in Aircel), Sistema (owns shares in MTS India) welcome the reform push.

Analysts believe 100% FDI in telecom can get more than $ 10 billion investment in the country in near to long term. The telecom sector may see more merger and acquisitions as well as consolidations in coming days, with new players the competition may get more intense.

Our Take:
In coming days it’s quite obvious that Vodafone India and Telenor may go for 100%-owned subsidiaries in India, while RCom may look for majority stake sell to foreign telcos (they had preliminary talks with South African telco MTN) and Sistema would go for more control in its Indian subsidiary – Sistema Shyam Teleservices.
But regarding new foreign operators I am quite skeptical, because India’s voice/2G growth is now in plateau stage and growth on data is still in nascent stage. With 100% FDI foreign companies will look into the opportunities in India – they need to see clear and non-controversial policies for telecom from the government; like merger & acquisitions, MVNO, spectrum sell & refarming and others. Until Govt. makes proper policies for Indian telecom, new investments will be at bay.

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5 Comments on "100 per cent FDI in Approved in Telecom: Proper Regulations Are Yet to Come"

 

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Raghu
August 3, 2013 12:41 am 12:41 AM

i really do not know by increasing the FDI limit – more operators will come into the picture. i do not think so. as majority is with Foreign Company 74%. I feel there has to be clear policy and clear rules and not change the rules often

CHAITANYA DAS
August 2, 2013 11:35 pm 11:35 PM

WHAT BETTER WILL DO THE FOREIGN COMPANIES WITH 100% FDI. IF ANY ONE COME TO INDIA AT FIRST THEY WILL INCREASE THE CALL RATE AND AFTER LEARNING FROM INDIAN OPERATERS ” TAKE MONEY AND DO NOT GIVE PROPER THING(LIKE DATA & VAS)”, ALSO START THAT PRACTICE.

Nirav Thakker
August 2, 2013 3:03 pm 3:03 PM

That has to be acquisitions and not accusations. Both are as different as Apples and Oranges!

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