Recently, a High Level Committee on Financing infrastructure constituted by the Cabinet Secretariat had suggested completely opening up the telecom industry to Foreign Direct Investment (FDI) in an effort to bring in fresh funds into the industry which is facing severe financial crisis.
Foreign investment is currently restricted to 74 percent in basic and cellular, unified access services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS) Global Mobile Personal Communications Services (GMPCS) and other value added telecom services, according to Ministry of Communications and Information Technology website. This is subject to Foreign Investment Promotion Board and security clearances. 100 percent Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipments.
Is raising FDI an answer to increasing foreign investment in the telecom sector? About two years back foreign investors were vying to invest in India’s telecom industry but no longer. In 2011-12, 2010-11 and 2009-10, telecom attracted FDI worth $ 1.99 billion, $ 1.66 billion and $ 2.55 billion respectively. However, this plunged to $93 million in the April 2012-January 2013 period on account of global economic slowdown and difficult policy environment in the country.
“Increasing the cap of Foreign Direct Investment is likely to help the sector. The company will be in full control of the Indian subsidiary and will not face issues like Telenor did with DLF some time back,” says Deepak Kumar, Independent Analyst.
The Industry is supporting this new initiative to increase the investment cap. Increasing FDI will also allow debt-ridden telecom companies to improve their financial health. The telecom industry has a debt of around Rs 1,875 billion. Most of the service providers like Bharti Airtel and Reliance Communications are battling financial issues.
However, just increasing the investment cap is unlikely to bring in more investment. The Government would need to come out with lucid policies, especially so with regard to spectrum auction. It would need to provide clear roadmap for spectrum auction as well as other issues like 3G roaming. The cancellation of 122 licenses last year by the Supreme Court had sent very strong negative signals to the global investors.
The proposed increase in investment cap might also bring in some security concerns. The Department of Telecommunications (DoT) is likely to oppose this initiative on the grounds of security threat. The Government had earlier come out with Preferential Market Access policy to promote indigenous manufacturing in an effort to take care of the security concerns.
Light Reading India - Networking the Telecom Industry
.
Foreign investment is currently restricted to 74 percent in basic and cellular, unified access services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS) Global Mobile Personal Communications Services (GMPCS) and other value added telecom services, according to Ministry of Communications and Information Technology website. This is subject to Foreign Investment Promotion Board and security clearances. 100 percent Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipments.
Is raising FDI an answer to increasing foreign investment in the telecom sector? About two years back foreign investors were vying to invest in India’s telecom industry but no longer. In 2011-12, 2010-11 and 2009-10, telecom attracted FDI worth $ 1.99 billion, $ 1.66 billion and $ 2.55 billion respectively. However, this plunged to $93 million in the April 2012-January 2013 period on account of global economic slowdown and difficult policy environment in the country.
“Increasing the cap of Foreign Direct Investment is likely to help the sector. The company will be in full control of the Indian subsidiary and will not face issues like Telenor did with DLF some time back,” says Deepak Kumar, Independent Analyst.
The Industry is supporting this new initiative to increase the investment cap. Increasing FDI will also allow debt-ridden telecom companies to improve their financial health. The telecom industry has a debt of around Rs 1,875 billion. Most of the service providers like Bharti Airtel and Reliance Communications are battling financial issues.
However, just increasing the investment cap is unlikely to bring in more investment. The Government would need to come out with lucid policies, especially so with regard to spectrum auction. It would need to provide clear roadmap for spectrum auction as well as other issues like 3G roaming. The cancellation of 122 licenses last year by the Supreme Court had sent very strong negative signals to the global investors.
The proposed increase in investment cap might also bring in some security concerns. The Department of Telecommunications (DoT) is likely to oppose this initiative on the grounds of security threat. The Government had earlier come out with Preferential Market Access policy to promote indigenous manufacturing in an effort to take care of the security concerns.
Light Reading India - Networking the Telecom Industry
.
