Flow Of Foreign Funds Into Telecom Sector May Dry Up: Warburg Pincus

New Delhi, Aug 29: | Updated: Aug 30 2003, 05:30am hrs
Warburg Pincus has warned that foreign funds for the Indian telecom sector could dry up over the next year if rates of return are not good enough. The global private equity fund firm has a sizeable exposure in the Indian telecom sector through a $300 million investment in Bharti Tele-ventures.

There isnt enough capital in India to finance high growth rates of the telecom sector. Current growth is being funded by money raised through debt in the past. The needs of providers of capital need to be met. If rates of return are not good enough, funds might dry up over the next twelve months, Dilip Pathak of Warburg Pincus said at an international round table organised by the Centre for Infrastructure and Regulation of National Council of Applied Economic Research (NCAER) on Friday. He called for clearer policy and regulatory environment. It was important to decide how many licences should be given out and to prevent companies to gain backdoor entry into the cellular market, he added in an obvious reference to the limited mobility issue.

CDC Capital Partners, which has invested in BPL Mobile also called for stability in the regulatory environment and increase in foreign investment limits. CDC Capital Partners MD Donald Peck pointed out that countries like US and Singapore, which have high security concerns, also permit higher foreign investment limits as compared to India.

The Telecom Regulatory Authority of India (Trai) chairman Pradip Baijal pointed out that increased competition has led to high growth and simultaneous fall in tariffs in the telecom sector. The tariffs for cellular services have fallen, but firms were not complaining since the number of subscribers have grown, he added.

World Bank Institutes team leader for Infrastructure Regulation Group Paul Noumba said it is important for regulators to not only create a level-playing field but to maintain it as well.

Earlier, in the seminar on Challenges to Competition in the Telecommunication Sector and the Impact on Industry Structure, Organisation for Economic Cooperation and Development (OECD) communications policy analyst Sam Paltridge explained how telecom market structures were evolving in response to regulatory and technological advancements.