Telcos to get 4 months to correct FDI breach

New Delhi, March 29 | Updated: Mar 30 2005, 05:30am hrs
Conceding that foreign institutional investment in telecom companies is a function of market dynamics, the government has decided to allow companies up to four months to pare their foreign holding to the stipulated 74% if the cap is breached at any point of time. Further, the government is also likely to relax the definition of resident Indians to give telcos more leeway in making key senior level appointments.

To make the telecom foreign direct investment (FDI) policy more amenable to the industry, the government is also likely to permit telecom companies outsource software processes to agencies from remote destinations. The policy announced in February first week had barred Indian telecom service providers from giving remote access to any equipment manufacturer or agency outside India for maintenance or repair.

Bharti Tele-Ventures, for instance, has already outsourced its network maintenance to Ericsson. Several other telcos are planning to hand over the task of network maintenance to specialist overseas firms. Industry experts argue that large telcos will explore options of setting up BPOs or call centres abroad to cut costs.

According to senior government officials, the guidelines allowing 74% FDI in the telecommunication sector have been finetuned after discussions between the finance, communications and home ministries and a notification will be issued shortly. The Cellular Operators Association of India and several telecom companies individually had approached the department of telecommunication to clarify several aspects of the policy which impinged on their day-to-day operations.

The officials also said that the industry had asked the DoT to exclude the holding of banks in telecom companies while arriving at the 74% FDI limit. The FII holding in banks that held stakes in telecom ventures would indirectly translate into a higher foreign holding in the telcos. We might exclude public sector banks holding in telcos while calculating the FDI limit, an official said.