World Dialogue on Regulation

In increasing the composite foreign investment limit to 74%, the Cabinet has said the remaining 26% needs to held by resident Indians or Indian companies. This means that if the Indian company has any foreign component, it would be proportionately counted when arriving at the 74% foreign investment ceiling.

At present, the foreign component in an Indian operator can virtually go beyond the 49% limit if the Indian promoter had FIIs or equity contribution by a foreign company. Further, the total holding of Indian public sector banks and public sector financial institutions (even if they have any foreign investment) will be treated as Indian holdings.

TV Ramachandran, director general, Cellular Operators Association of India said, foreign companies were seeking clarity on the FDI policy. “It will not be surprising if you see foreign investors picking up additional stakes in Indian telcos in the next few weeks,” he said.

Essar Teleholding CEO Vikash Saraf said, “The move will help companies to attract large investments to achieve increased telephony penetration in the country.”

The caveat of allowing only resident Indians in key management positions includes CMD, CEO, COO and CTO. Among Indian operators, Tata Teleservices already has an expatriate, Darryl Green as its CEO.

The government also proposes to restrain operators from allowing remote access to any equipment manufacturer or agency outside India for any maintenance or repairs. While Bharti Tele-Ventures has outsourced its IT services to IBM and network management to Ericsson and Nokia, a company spokesperson said, these do not fall under the “no remote access” clause.

Source: The Financial Express