The Hindu Business Line : FDI in telecom — Raising limit may not ring in foreign capital

According to a senior Bharti officials, while the hike in FDI limit is necessary, it is not a sufficient condition for growth of the telecom sector which continues to be bogged down by regulatory and policy uncertainties.

NEW DELHI, April 24

EVEN as the Union Cabinet has once again deferred its decision to hike the FDI limit in telecom services to 74 per cent, serious doubts are now being expressed both at the policy and industry level, whether any such move will actually lead to a surge in foreign investment.

While the Department of Telecommunications (DoT) has raised apprehensions at the impact of this move on national security, even many in the industry who have been seeking a hike in the limit for long agree that such a step that may not after all open the floodgates. According to a senior Bharti officials, which incidentally has been the most vociferous in demanding such a policy decision, while the hike in FDI limits is necessary, it is not a sufficient condition for growth of the telecom sector which continues to be bogged down by regulatory and policy uncertainties.

Instead the immediate beneficiaries of the move are likely to be foreign telecom companies who have managed to circumvent the existing limit of 49 per cent and taken over control of the Indian operations by "complex financial engineering."

"While Bharti has certainly been demanding a hike in the FDI limit, it is not that we are urgently in need of any funds at the moment. In fact, our funding for the entire year has already been tied up. It is the other cellular companies who will benefit more to start with, as they can legitimise their earlier holdings," they noted. It is only after the regulatory and policy issues are stabilised that foreign companies will think of investing further in this sector. Bharti, meanwhile, will continue to pursue all avenues to raise funds for further investment, including the hiking of the FDI participation in the company, they said.

The existing partners of Bharti Tele-Ventures Ltd who have a combined stake of 47.3 per cent in the company include SingTel (with 28.5 per cent), Warburg Pincus, International Finance Corporation, Asian Infrastructure Fund Group and New York Life Insurance.

Meanwhile, the other major telecom operators who could benefit from the move are Hutchison, Escotel, BPL Cellular, BPL Mobile, Spice Communications and Idea Cellular.

While Hutchison Whampoa has a 49 per cent stake in Hutchison telecom, the other foreign companies with a similar stake in Indian companies include First Pacific, Hong Kong (Escotel) and AT&T (BPL Cellular).

Distacom has a 42 per cent stake in Spice Communications, AT&T Wireless (33.3 per cent) in Idea cellular, TIW, Canada (30 per cent) in Shyam telecom, France Telecom (26 per cent) in BPL Mobile, Vodafone (21 per cent) in RPG Cellular , Cellnet, USA (11 per cent) in RPG Cellular, Century Telephone (10 per cent) in Aircel and Verizon (10 per cent) in Reliance Telecom.

According to industry sources, these are the companies to watch out for now.

In any case fresh FDI into the sector will be slow to come by. Especially at a time when global telecom majors the world-over are struggling to cope with their losses and the rollout of 3G networks which has been a non-starter for close to a year now.

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