More India Telecom Flip Flopping


Following up on our previous report: When in doubt, extend deadlines and postpone decisions. That’s just what happened. While India’s Finance Minister turned down the telecom department’s ‘We give up’ proposal to cancel the increase in FDI in telecom and averred that, “the decision to increase FDI to 74 percent stands,” he left it to the various ministries and the department to sort out their differences and gave them three months to do so. This is the third such extension.

Business Standard quotes Finance Minister P. Chidambaram as saying, “The operators have expressed difficulties in complying with some of the conditions. The government will also take into consideration the security requirements. Whatever is necessary and imperative will be kept.” You think they’ll come to an agreement sometime this decade?


Shefaly Yogendra

In response to dridsankalp, opening up a sector for first time investment is quite different from allowing a mature sector to handle its investment issues. A Spanish telecomms firm buying a majority stake in a UK mobile operator is not called FDI in Europe; it is called consolidation in the telecomms sector.

However not all potential investors are created equal. BT for instance has had business relationships and presence in India (through partnerships) for nearly 2 decades and in an effort to show their continued intent of investing they have announced plans to hire 6000 more staff in India. When the sector is opened up formally, firms like BT will have an advantage that new entrants waiting till the formal day will not.


All FDI’s are not the same. Some are goverened by investment motives and others by politics.

Consider this Orascom, an Egyptian company wants to own a majority in India or Chinese companies through Mauritius offshore entities.

Compare that with China where majority Foreign Telecom does not exist even in thoughts and in US where they have to take senate approval.

The difference is that in Europe or US the local legal framework and regulatory oversight is quite effective resulting in companies abiding by the law.

Even senate representatives are actual representatives of the public. In India average population will not be able to influence its senate on such issues.

In India the legal system is not effective and with high endemic corruption the nonconfirmers can get away scott free.

Hence eventhough in principal there should not be a limit, but one should measure the pros and cons rather carefully.

The question remains whether India Inc. can raise financing for these large projects on its own?


wrt the security issue it would be interesting to know what the policies of other countries are. Do US/UK/China/Japan allow unlimited investment in the telecom sector even if the investor is partially owned by a foreign government?

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