Originally published in January 14th 2013
A move by the government to create foreign direct investment
(FDI) policy more severe in the telecom sector has elevated hackles
amid global companies.
The department of telecommunications (DoT), regarding the draft
common licence procedure to be signed with telcos which freshly won
spectrum in the 1800 MHz auction of November, has integrated a new
section for foreign companies. It says, "In order to make sure
that at least one grave resident Indian promoter subscribes
rational amount of the resident Indian shareholding, such resident
Indian shareholder shall grasp at least 10 per cent equity of the
licence corporation."
This could have serious impacts on all foreign telcos, counting
new ones such as Telenor and presents wanting to drift to a
universal licence, under which telcos can work all services. They
would currently have to discover an Indian investor who will hang
about invested, even if the foreign company favors to strip stake
through a public offering and wrap the 26 per cent Indian equity
requirement soon after.
A top DoT official, who did not want to be publicized, confirmed
that the clause was integrated to make sure the serious Indian
shareholding in foreign telcos working in the countries. However,
proposals made by the Telecom Regulatory Authority of India on UL
guidelines, scheduled January 2, do not take in the clause.
Norwegian giant Telenor's Indian subordinate Telewings
Communications, which has queried the move, has supposed as the
clause was distant and is not there in the FDI policy on telecom,
its reintroduction lacks a rational or authoritarian basis. The
company just won spectrum in 1800 MHz in six circles and finished
an Rs 1,326-crore frank payment. Telenor did not reply to questions
from Business Standard. Telenor has told the government the shift
would inflict difficult barriers on foreign telcos, as they have to
discover an Indian sponsor who is all set to hold up to 10 per cent
at all times, and at a time when the last lack craving to invest in
the sector. And, it makes no intelligence if the company chooses to
list the company and go public.
A top managerial of a leading foreign incumbent telco adds,
"There is no such clause in our contracts. But if this is
compulsory, serving operators will not drift to the UL at all. And,
it will generate a non-level playing field another time."
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