The Hindu Business Line : GoM suggests hike in foreign investment cap in telecom to 74%

GETTING CONNECTED: The Minister for Disinvestment, IT and Communication, Mr Arun Shourie, shaking hands with the Finance Minister, Mr Jaswant Singh, as the Minister for Commerce and Industry, Mr Arun Jaitley, looks on during the Group of Ministers meeting on telecom at North Block on Thursday. — Kamal Narang

New Delhi , Sept. 25

The Group of Ministers (GoM) on Telecom has recommended a hike in the foreign investment limit in Indian telecom companies to 74 per cent from the present overall cap of 49 per cent.

While the Foreign Direct Investment (FDI) by foreign telecom companies will still remain capped at 49 per cent, an additional 25 per cent investment by foreign institutional investors (FIIs) will be permitted in the joint venture entity.

Till now, the 49 per cent foreign investment cap on telecom companies included both FDI as well as FII investment. The GoM recommendation, which will go to the Union Cabinet for approval, is expected to attract more investments in the fast-growing telecommunications sector.

The panel has also recommended that management control of telecom companies should remain with Indians, regardless of the foreign investment in a company, the Union Telecommunications and Disinvestment Minister, Mr Arun Shourie, told newspersons after the first meeting of the GoM here on Thursday.

The GoM, comprising six Ministers and chaired by the Finance Minister, Mr Jaswant Singh, has also recommended that telecom companies operating within a circle be allowed to merge as long as the number of operators in that circle does not fall below three.

"Inter-circle mergers were allowed so far... and now intra-circle mergers are to be allowed," Mr Shourie said, but noted that in the event of a merger, the new entity will be allotted spectrum only on the basis of the subscriber base.

Also, the rural telephony obligations will be shifted to the new owner. Mr Shourie said the GoM was `in principle' in favour of having a universal licence for the telecom sector instead of multiple licences.

The Telecom Regulatory Authority of India (TRAI) has been asked to work out a plan on this to be presented to the GoM at its next meeting on October 4.

The GoM gave a go-by to the much-hyped Convergence Bill, which envisaged a super regulator for the three sectors -- telecom, IT and broadcasting -- as the Ministers felt that the Bill "cannot be pursued further.

The universal licence is a step towards convergence," Mr Shourie said.

On the issue of allocating more spectrum to telecom companies, all the members of the GoM agreed that there was such a need.

A meeting would be convened with the Ministry of Defence for releasing additional spectrum to the telecom companies.

In order to increase the teledensity in rural areas, the Department of Telecom and the Finance Ministry would together work out a joint note for the Universal Service Obligation (UFO) fund. The GoM also favoured extending support to Bharat Sanchar Nigam Ltd (BSNL) for the entire period of Tenth Plan by waiving the licence fee and dividend payment obligation The GoM, Mr Shourie said, was against imposing sales tax, varying from 12 to 15 per cent on telecom services and pointed out that the Supreme Court has ruled that telecom services should not be treated as a commodity.

Among those who attended today's meeting included the Minister for Law and Commerce & Industry, Mr Arun Jaitley, and the Information and Broadcasting Minister, Mr Ravi Shankar Prashad.

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