The Hindu Business Line : `More funds flow into telecom only if regulatory hassles go'

THE Group of Ministers' recommendation that the foreign investment cap in the telecom sector be raised to 74 per cent has been greeted with approval by telecom operators. However, operators wonder whether any investments would actually be made, should the confusing regulatory atmosphere prevail."The increase of 25 per cent in foreign investment limit is itself a good step," said Mr Vikas Saraf, CEO of Essar Teleholdings, promoter of the Hutch group's cellular operations in the country. "But for large investments to be made, regulatory issues should also be sorted out," he said.

The issue of call forwarding by limited mobility operators, which brings them in direct competition with GSM operators is the key, say some industry officials.

According to Mr Saraf, the restriction that the management should be in the hands of the Indian promoter would not be an issue with foreign investors as much as the issue of return on investments.

Already several possible mergers have been held up purely out of disagreement on valuations, the head of research at an equities firm said, citing the case of Idea Cellular and BPL Communications.

Some analysts did not agree that management restriction would not be an issue with foreign investors. "Who is going to put in money if they do not have control over the running of the company in a manner they feel will fetch them good returns?" posed an equity analyst. However, analysts felt the ability of some groups - such as Bharti - to raise funds would improve enormously with foreign investment increase.

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