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Andrew Bonwick
Vice President of Product Development at Relm Insurance
Madhav Sheth
CEO of Ai+ Smartphone
Stephen Rose
CEO Render Networks
Commerce and Industry Minister Suresh Prabhu has finally said that the Telecom Ministry will take a decision on whether or not Idea Cellular will be granted with the permission for 100% FDI in the company, commerce and industry. However, things still remain twisted as the DoT has put some conditions while also taking inputs from the Department of Industrial Policy and Promotion (DIPP) on the said proposal of 100% FDI. PTI revealed that Prabhu said the following about Idea Cellular’s proposal on the FDI policy “The matter is completely in the domain of the line ministry. We have already clarified. No need of our approval.” Also, speaking about the tax liabilities and implying that they do not constitute additional conditions he spoke “We have sent back (the proposal) immediately. We have stated that it is for you to decide.”
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This new proposal from Idea comes at a very crucial time as the impending merger of Vodafone India and Idea Cellular is just around the corner. Post this merger the Idea-Vodafone merged entity will emerge as the largest telco in the country. Currently, the FDI policy outlines that an overseas firm is allowed to buy up to 49% stake in an Indian telecom company under the route of automatic approval, however, if a firm wants to buy more than 49% stake, then a special government approval is needed.
It was in last year after the very cut-throat competition between the telcos broke out that Idea and Vodafone announced their plans of merging together. This new entity will be worth $23 billion and will occupy 35% market share.
To give our readers an idea about how the Idea shareholding looks like in the current scenario – The foreign stakeholders hold about 34% including 7.49% in the promoters group and the rest are public shareholders. As for Vodafone India, the British telecom company Vodafone Group plc is a major stakeholder in the company. Therefore, when Vodafone and Idea will merge the foreign shareholding would breach the 49% approval limit. In this situation, it becomes essential that the company sought approval from the government.
