Foreign-controlled telecom companies cheer 100% FDI in sector

NEW DELHI: The Cabinet on Thursday approved 100% foreign direct investment (FDI) in the telecom sector, bringing cheers to foreign-controlled telecom companies which will now be able to buy out their minority Indian partners. However, industry experts warn that raising the FDI cap might not attract significant investments until the government introduces clear, industry-friendly policies in the sector, currently marred by regulatory hurdles.

"There isn't any clarity on mergers and acquisition guidelines, nor a clear road map on spectrum re-farming. One time spectrum charge is under litigation and despite New Telecom Policy 2012 proposing efficient use of spectrum, legality of 3G roaming pacts has been questioned," Hemant Joshi, Partner, Delloite Haskins & Sells, said listing some of reasons why raising the FDI cap might not be enough to attract investments.

Even then, foreign-controlled telecom operators in the country welcomed the government's decision to hike the cap. Norwegian telecom operator Telenor, which operates telecom services in India under the brand Telewings, and the Russian telecom operator Sistema- controlled SSTL, have welcomed the move the past.

According to the new rule, FDI up to 49% will be under automatic route while any equity infusion beyond this will need approval from Foreign Investment Promotion Board.