Telecom sector to gain most from India’s new FDI policy.
By R Chandrasekaran
CHENNAI: The telecom sector is expected to benefit the most from the government of India’s decision to increase foreign direct investment (FDI), since the sector is burdened more with debt, especially foreign currency. This is important for the sector in the wake of the falling Indian currency, which means higher outflow for a USD to service the foreign debt.
On Tuesday, the government allowed 100 percent foreign direct investment in telecom sector. This is expected to benefit the United Kingdom-based Vodafone, Norway-based Telenor, Malaysia’s Maxis and Russian company Siestma. Japan-based Docomo also stand to gain from the proposal.
These foreign companies hold stake in Indian operations. Currently, India allows up to 74 percent of FDI in telecom sector, 49 percent through automatic choice and the rest through Foreign Investment Promotion Board. The revised FDI policy could allow them to lift their stake in Indian companies. It is quite likely that these companies may be ready to buy Indian partners stake in the telecom companies.
These apart, other Indian companies too stand to benefit from the policy. The telecom sector is burdened by a whopping debt of Rs.2.5 trillion and at least half of them are foreign debt. Therefore, the revised policy could benefit them to not only cut down its foreign debt exposure, but could also plan in retiring some of its debt.
What is more important in the policy is that a foreign investor need not have to search for an Indian partner to enter the telecom sector and they can simply submit their proposals for setting up their shops in India through the 100 percent FDI route.
The government’s decision comes amidst raging controversy on the issue of granting 2G license and the Supreme Court is hearing the case of the potential losses that the government had suffered. The issue had cost the job of the communications minister too in 2010.