The increase in foreign direct investment cap for telecom sector is unlikely to bring any new player into the market due to uncertainty in spectrum pricing and mergers and acquisition norms. The increase in FDI cap from 74 per cent to 100 per cent will, however, enable existing foreign investors to take full control of their ventures.

Jaideep Ghosh, Partner-Telecom, KPMG in India, said, “We do not see a greenfield telecom venture immediately considering market dynamics and regulatory environment. There are several regulatory aspects, not necessarily related to FDI, which remains to be finalised. Regulatory clarity would provide the industry with a clear direction, and thereafter we may then see significant developments to benefit from enhanced FDI limits.”

Most analysts believe that nothing much will change in the telecom space due to the increase in FDI cap. “Money will first flow into the accounts of either Indian promoters or FIIs, who would want to cash out,” said B.K. Syngal, former Chairman, Videsh Sanchar Nigam Ltd.

Existing players

But existing investors such as Telenor, Vodafone and Sistema are not complaining. For them the new norm will enable them to ease out their Indian partners and infuse more funds. Some of the foreign players were finding it tough to infuse fresh funds into their ventures as their Indian partners were not willing to put in money proportionate to the equity they held. This forced foreign investors to take the debt route for funding growth.

Glenn Mandelid, spokesperson for Telenor Group’s Asian operations, said, “This will provide mobile operators in need of additional funding more flexibility in attracting investments to fund growth. Telenor Group has already expressed interest in raising its stake in the Indian operations to 74 per cent. ”

thomas.thomas@thehindu.co.in

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