Government Approves 100 % FDI in Indian Telecom Sector

The government has finally approved the 100 percent foreign direct investment (FDI) in telecom sector. Prime Minister Manmohan Singh in a meeting with senior cabinet colleagues, including Finance Minister P. Chidambaram, Defence Minister A.K. Antony, Commerce and Industry Minister Anand Sharma and Telecom Minister Kapil Sibal, gave thumbs up to a proposal to hike the FDI cap in defense to 49 % from 26 % and 100 % from 74 %, in telecom sector.

Union Commerce and Industry Minister Anand Sharma said out of the 100 percent FDI, 49 percent will be done through automatic route and the rest has to be done through FIPB approval route. Earlier, out of the 74 percent limit, up to 49 percent was done by automatic route and rest through Foreign Investment Promotion Board's (FIPB) approval.

Moreover, Kapil Sibal dismissed security concerns over allowing foreign telecom companies to own 100 percent equity in Indian ventures. The security issue is not on the operators' side, it is not an entry barrier. Real issues (from security point of view) are the chips, the routers being imported. Whether a foreign telco has 74 percent stake, as is allowed at present, or 100 percent ,it does not alter the security issue," Sibal told to Firstpost

"The move to increase Telecom cap of 74% FDI to 100 % is welcome as it will help the industry to bring in more FDI to fund the high CAPEX demands of this sector especially in areas to enhance coverage, and launch new 3G and BWA services. This will undoubtedly have a huge benefit for our customers and higher license fee for the government." said Aircel in a statement to GizBot.

"The much-needed policy decision is a very positive development for the entire industry. With fresh foreign direct investments coming in, this would further catalyze growth and also the process of proliferation of telecom services across the country," said spokesperson for JSFC Sistema's Indian subsidiary, Sistema Shyam TeleServices Ltd (MTS brand), to Mint.