The government today allowed 100 percent foreign direct investment (FDI) in telecom sector; a key demand of the industry.there is raising of cap from 74 to 100 percent in basic and cellular services. Upto 49 percent remains under automatic route and 49-100 percent through FIPB route, commerce minister Anand Sharma said in a press conference.
In a major reforms push, the government today allowed 100 percent foreign direct investment in the telecom sector, meeting a key demand of the fund-starved industry.
"Basic and Cellular Services (fix phone and mobile services), existing has been 74 percent and up to 49 percent automatic route and 74 percent though FIPB route. Now there is raising of cap from 74 to 100 percent in basic and cellular services. Up to 49 percent remains under automatic route and 49-100 percent through FIPB route," Commerce and Industry Minister Anand Sharma said here.
A presentation was made by Department of Industrial Policy and Promotion (DIPP) following consultations with the key ministries or the nodal ministries involved, he said.
Earlier, FDI limit in the sector was 74 percent where 49 percent was done through automatic route and rest required nod from Foreign Investment Promotion Board.
The idea behind the decision to increase FDI limit in telecom sector is to help the industry get fresh funds to lower financial burden.
The moves also brings relief for foreign partners in telecom companies as they can have complete ownership of the business.
"Foreign investors will no longer need to partner with Indian investors in order to comply with regulatory requirements," PwC India's for Executive Director - Tax and Regulatory Services, Goldie Dhama said.
Telecom major Reliance Communications said: "100 percent FDI in telecom will enhance value for all stakeholders." A spokesperson of Russian conglomerate Sistema controlled SSTL's said, "Sistema Shyam TeleServices welcomes 100 percent FDI in telecom. The much needed policy decision is a very positive development for the entire industry."
Sanjeev Aga, director, Idea Cellular said, "This will help for foreign telcom which are already in India. I do not think there is any telcom in the world which wants to enter India at a 100% ownership right now. So I don't think it is going to be really helpful from any foreign direct investment inflows but who knows in three-to-five years the situation might improve."
Sistema holds 56.68-percent stake in SSTL, Russian government 17.14 and around 24 percent equity is owned by its Indian partner Shyam Teleservices.
According to a presentation by GSM industry body COAI to DoT, the debt of telecom sector stood at Rs 1,85,720 crore at end of 2011-12. This included debt of Rs 93,594 crore from domestic and Rs 92,126 crore from external sources.
Aircel, in which Malaysian telecom firm Maxis Communication holds 74 percent stake, said the move "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."
(With inputs from CNBC-TV18)