Telecom tower companies maybe allowed retaining 100 per cent Foreign Direct Investment, even after being brought under the purview of the unified licence regime. An internal committee set up by the Department of Telecom has said that lowering the FDI cap to 74 per cent may impact investor sentiments.

The Telecom Regulatory Authority of India had suggested this move to bring FDI norms for the telecom infrastructure segment at par with service providers.

Under the existing policy, telecom service providers are allowed FDI up to 74 per cent and have to pay an annual revenue share ranging between 6 and 10 per cent. Tower companies are not required to take a licence and hence do not pay any revenue share.

Revenue share

Under the proposed unified licence regime, the tower companies will have to pay a flat revenue share of 8 per cent. According to the report submitted by the internal committee seen by Business Line, the revenue share on tower companies may be brought down by 1 per cent to 7 per cent. According to the panel, the Government stands to get Rs 1,900 crore a year by imposing a revenue share on the tower firms.

While the committee has proposed to bring the tower firms under the unified licensing policy, it has suggested that an exemption may be sought from the Department for Industrial Policy and Promotion as far as FDI cap is concerned. The committee has, however, left to the Government to take a final view while giving the pros and cons of changing the FDI cap. If the FDI cap is lowered to 74 per cent, it will impact foreign tower companies such as American Tower Corporation, as it will have to get an Indian partner. It will also affect Indian telecom firms that are looking to raise funds by selling equity to strategic investors.

“Bringing in 74 per cent FDI cap is detrimental to the growth of infrastructure and will discourage investment in the sector,” the Tower and Infrastructure Providers Association had earlier said.

The tower companies are also opposed to the proposal of forceful migration to unified licence, as they would end up paying 7-8 per cent of their revenue as licence fee.


(This article was published on February 13, 2013)
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