The Hindu : Front Page : FDI in telecom allowed up to 74 per cent

Online edition of India's National Newspaper
Thursday, Feb 03, 2005

Front Page

Front Page

FDI in telecom allowed up to 74 per cent

By Ashok Dasgupta

NEW DELHI, FEB. 2. The Union Cabinet on Wednesday approved the long-deliberated proposal to hike the ceiling of composite foreign direct investment (FDI) in the telecom sector to 74 per cent from the existing 49 per cent. This is subject to certain conditions and clauses inserted by the Home Ministry to safeguard the nation's interest by way of ensuring the "Indianness" of the operating companies.

Briefing newspersons after the Cabinet meeting, the Finance Minister, P. Chidambaram, said the increased foreign holding limit at 74 per cent would hold good for services such as fixed line basic services, cellular or mobile services, unified access services, national and international long distance telephony, V-Sat, public mobile radio trunked services (PMRTS), global mobile personal communication services (GMPCS) along with other value-added services.

With today's decision, the telecom companies which function as service providers and the people at large who are the actual users, have reason to cheer.

For while the telecom companies will have easier access to larger chunks of foreign investment for capacity expansion and wider network, the consumers can look forward to cheaper call rates.

Explaining the contours of the increased foreign holding limit, Mr. Chidambaram said that the 74 per cent cap would include but will not be limited to investments by foreign institutional investors (FIIs), non-resident Indians (NRIs) or overseas corporate bodies (OCBs), foreign currency convertible bonds (FCCBs), American depository receipts (ADRs) and global depository receipts (GDRs).

In no case is the ceiling to be exceeded irrespective of whether the foreign investment comes in through the issuance of convertible preference shares or proportionate investment in Indian promoter/investment companies, including their holding companies.

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