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Telecom FDI hike may create stronger players

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Our Bureau

New Delhi, Feb. 2

THE telecom industry on Wednesday said that the decision to increase the foreign direct investment (FDI) cap would result in the emergence of stronger players, which will help the industry achieve its teledensity targets. The industry also said that the decision reflected the Government's resolve to press ahead with its reform agenda for the infrastructure sector.

Mr K.A. Chaukar, Managing Director, Tata Industries Ltd, said: " The rising inflows of investments, technology and value-adding solutions and services will have a positive impact not only on the telecommunication and related industries, but also on all commercial, agricultural and industrial sectors for which telecommunication is fast becoming a major contributor to improving efficiency and productivity. Now that the regulatory concerns would be much less, investment opportunities in India in the telecom sector are sure to get a higher priority with several potential investors from the international business and investment community.''

The policy decision would allow the Tatas to dilute its stake in the GSM-based cellular company, Idea Cellular, and at the same time explore the option of getting a foreign partner for its CDMA-based mobile business company, Tata Teleservices.

Small operators such as Spice Telecom and Shyam Telecom also stand to gain with many large telecom companies including Vodafone looking to enter the Indian market through acquisitions.

Mr Sanjay Mehta, Head, Erix Advisors, said, "The move would lead to consolidation in the industry, it will simplify the equity structure of companies and going to market will be easier. This was due for a long time."

The Assocham President, Mr Mahendra K. Sanghi, recommended a similar hike in sectors such as insurance and civil aviation.

Mr K.N. Memani, President, PHDCCI, said: "Such a decision bids well for the country as newer players with upgraded technology would be able to compete to the advantage of the consumers. The decision shall have a multiplier effect on the ICE industry and would go a long way in consolidating the gains of the sector to enable it to become a global player in the foreseeable future."

Describing the decision as ``most heartening'', the Federation of Indian Chambers of Commerce and Industry (FICCI) stated that decision met its long-standing demand. "India is the only country in the world which has competition in basic telephony. The decision would fuel expansion in wireless and fixed lines in both small towns and the rural sector," said a statement.

Some of the telecom operators, however, said that the Government needs to address other pressing issues before it can expect to attract more foreign investment.

Mr B.K. Synghal, Vice Chairman, BPL Communication, said, "Though is a step in the right direction, the government must address the regulatory issues like that of ADC, spectrum allocation, unified licence to make it conducive for foreign players to invest in this market."

(This article was published in the Business Line print edition dated February 3, 2005)
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