India's Telecom Commission Approves 100 percent FDI In The Country's Telecom Sector

 
on July 03 2013 4:45 AM

India’s Telecom Commission, on Tuesday, endorsed a proposal to allow foreign operators to have a 100 percent stake in companies operating in the country’s telecom sector, which if made in to law, will allow players like Vodafone Plc (NASDAQ:VOD) and Telenor ASA (OTCMKTS:TELNY) to operate independently without local partnerships.

The decision has come at a time when India’s home ministry has reportedly raised security concerns over enhancing the foreign direct investment, or FDI, ceiling in key sectors like defense, civil aviation and telecom.

The commission, which is the telecom department's highest decision-making body, approved the proposal after a government committee set up to revive foreign fund flow to the economy, recommended increasing the FDI cap in local phone carriers to 100 percent from the existing 74 percent.

However, a government source told Reuters that the decision would be subject to the approval from the Department of Industrial Policy and Promotion, and other official entities.

"We have said it should be done in consultation with home and other concerned ministries," the official said.

The new rule, if ratified by the government, will allow foreign players to invest up to 49 percent through the automatic route, while further investments would be subject to approval by the Foreign Investment Promotion Board, a senior government official told Reuters.

Complete ownership will allow foreign players to launch operations directly in India’s growing telecom sector, while existing players like Vodafone, Telenor, Aircel and Sistema will not require domestic partners to operate in the country.

At present, Newbury-U.K.- based Vodafone holds a 76 percent stake in Vodafone India, while Bharti Telecom and Singapore’s state-run SingTel (SGX:Z74) jointly hold a 65 percent stake, and the Qatar Foundation Endowment owns a 5 percent stake, in domestic phone carrier Bharti Airtel Limited (BOM:532454).

Malaysia-based Maxis Communications owns a 74 percent stake in Aircel, while Sistema (OTCMKTS: JSFCF) and the Russian government hold stakes worth 56.68 percent and 17.14 percent respectively, in Sistema Shyam Teleservices.

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