FDI Inflows to Telecommunications

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FDI Inflows to Telecommunications have been quite high since the past few years. The telecom sector in India is growing at an alarming pace. India has more than 125 million telephone networks, which is one of the largest communication networks across the globe.

An Overview of the Telecom Sector in India-

The government of India has taken measures to ensure pro-active and positive policies to boost the Foreign Direct Investment (FDI) to telecommunications sector in India.Tremendous growth has taken place in this sector in recent years.

A number of telecom service providers are working in both the private and public sector. The two most crucial causes behind the huge success of the telecom sector are the growing demand for mobile phone services and private sector participation in the telecommunication industry. The private sector participation in the telecommunication sector in India is increasing at a rapid pace.

Opportunities of FDI in the Telecommunication Sector in India

FDI opportunities in the telecommunication sector in India exist in the following areas -
  • E-commerce
  • Manufacturing of equipments and components
  • Tele-education
  • Tele-banking
  • Exports of telecom equipment and services
  • Tele-medicine
  • Setting up a national long distance bandwidth capacity in the country

FDI Inflows to Telecommunications-

The limit to FDI in telecommunications was increased from 49% to 74% in 2005 by the Department of Industrial Policy and Promotion that functions under the Ministry of Commerce and Industry, Government of India. Important aspects of FDI in telecommunications are -
  • Telecom sectors which will be entrusted with the FDI ceiling include National/ International Long Distance, Basic, Cellular, V-Sat, Unified Access Services, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services

  • The major sources of foreign investment in Indian market include Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity

  • The license companies which will be regulated by the public sector banks in India and the public sector financial institutions in India will be recognized as 'Indian holding' and Indian shareholding cannot be less than 26 percent by any means

  • FDI up to 49 percent will be allotted to certain telecom sectors in India under automatic route

  • In case of the license companies, FDI will require the FIPB approval provided it has a total ceiling of 74 percent

  • The investments that would require FIPB approval will clearly depict the evidence that the company would abide by license Agreement

  • FDI investments will be entitled to the laws of the Government of India and not the overseas countries

Last Updated on 4/23/2011