Sanjeev Aga bats for 100% FDI in telecom

Arvind Mayaram on Tuesday submitted the Department of Economic Affairs(DEA) report on reviewing FDI sectoral caps to the Finance Minister. In the report Mayaram suggested that FDI in telecom sector can be hiked from 74 percent to 100 percent under the Foreign Investment Promotion Board (FIPB) route.

In an interview to CNBC-TV18, ex-CEO Idea Sanjeev Aga and Sajai Singh, partner, JSA talk about the possibitlies of the 100 percent FDI in telecom.  According to Aga, there is absolutely no sense in staying stuck on 74 percent. "I don't think it is going to interest outside telecos, but from a long-term point of view it is a very logical, and commonsensical step. It should have been taken years ago", he added. Also read: Mayaram submits FDI report to FM; recommends hiking caps Below is the verbatim transcript of his interview to CNBC-TV18 Q: Mayaram has suggested, in a sense the 26 percent cap is now irrelevant. So, he has done away with that altogether, it is 49 percent, 74 percent and then a 100 percent, your first reactions to that? Singh: I haven’t read the recommendations, so I don’t know the exact content. However, from what I have read from the press reports, he is just following what company law and various other statutes give power to various shareholders. So, if you hold a chunk of shares you get certain rights from the law whether it is a Companies Act or other statutes. These thresholds start at 10 percent, 25 percent, 50 percent, 75 percent and 90 percent and with one share plus. Those rights do not dramatically change all the way upto 49 percent. So, whether you hold 26 percent or you hold 49 percent it is not that dramatically different in terms of the control. Obviously dividend and other benefits are there. However, there isn’t a dramatic difference in terms of what resolutions you can block and what resolutions you can pass. So, I think in that sense the 26 percent versus 49 percent is redundant. I think it is a positive move. It is going to send positive signals and we need to send that especially what is happening with the rupee. We need to send very positive signals. So, I fully endorse this move. It is not going to dramatically change in terms of the control and the power that a foreign shareholder will have on the Indian company. Q: He has suggested that telecom sector be hiked from 74 percent to 100 percent of course under the Foreign Investment Promotion Board (FIPB) route. The Department of Telecommunications (DoT) was not on board with that proposal, do you believe this will go through? Aga: I am just not connected with the goings on Delhi, so I have no clue as to whether it will or will not go through. However, it is sensible or let me put it the other way round; I just don’t see what purpose is the 74 percent cap and other than offering the possibilities of escort services to some undeserving Indian promoters. Therefore, there is absolutely no sense in just staying stuck on 74 even though I don’t think at this point of time in telecom it is going to make a huge difference other than some of the telecos who are already into telecoms, some foreign telecos. I don’t think it is going to interest outside telecos, but from a long-term point of view it is a very logical, and commonsensical step. It should have been taken years ago. Q: Sunil Mittal said that 100 percent will be welcomed by the telecom industry, but as you were pointing out it is actually going to be the likes of Sistema Shyam etc. who have been looking at bringing in more capital that will be more welcoming and will be perhaps happier with this decision being taken? Aga: Yes, but there are two sides to capital. 1) availability of capital; 2) just because capital is available it does not mean it is going to flow in because in the long run capital chases returns. There has been a huge problem with returns in telecom for everyone other than maybe just one, two or three telecom operators out of the 20 or 30 who started of. So, there is a problem, but one step at a time. Even if this step does not pay for itself in the short-run, from the long-term point of view it is one irritant out of the bag.