The Hindu Business Line : Govt revises FDI norms for telecom companies

New Delhi April 19 Even as Vodafone's proposal to acquire stake in Hutchison Essar is being investigated by the Foreign Investment Promotion Board for breach of FDI norms, the Government has expanded the definition of indirect foreign holding by including proportionate investments made by a foreign entity in a telecom company through mutual funds, trusts or a holding company.

Such equity holding will be counted as FDI under the new guidelines to be effective from July 19. The earlier FDI guidelines under Press Note 5 had only specified investments through holding companies as FDI.

Revised Guidelines

"Indirect foreign investment shall mean foreign investment in the company/ companies holding shares of the licensee company and their holding company/companies or legal entity (such as mutual funds, trusts) on proportionate basis. In any case, the `Indian' shareholding will not be less than 26 per cent," said the revised guidelines issued on Thursday as Press Note 3.

Press Note 5 had defined indirect FDI as proportionate foreign investment in Indian promoters or investment companies including their holding companies.

Monitoring Centres

The Government has also allowed telecom companies to locate their network monitoring centres outside the country after meeting security conditions. FDI norms stipulated under Press Note 5 made it mandatory for all telecom operators to locate their network monitoring centres within the country.

Multinational companies like AT&T, who have already set up large network monitoring centres elsewhere in the world, had opposed this as they were averse to investing again for the same facility. The security agencies were, however, insisting on keeping the network monitoring within the country. The revised norms under Press Note 3 have therefore imposed some additional conditions for operators to take into account the concerns raised by security agencies. For instance operators will be allowed to locate the monitoring centres only in specific countries.

Monitoring Content

They also have to make available a mirror image of the network online to security agencies apart from maintaining an audit trail of traffic for a period of six months. The remote locations will also not be allowed to monitor content.

Norms barring foreigners from holding key posts in telecom companies have also been relaxed. Now telecom companies will be able to appoint foreigners subject to periodic clearance from the Ministry of Home Affairs.

More Stories on : Foreign Direct Investment | Telecommunications

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