FIPB clears Verizon stake transfer

After being rejected for want of security clearance a year before, the Foreign Investment Promotion Board (FIPB) has cleared an application by Verizon Communications India, arm of the US telecom major.

It overruled concerns raised by the ministry of home affairs (MHA) that the parent company had shared data with US intelligence agencies like the National Security Agency and the Federal Bureau of Investigation. The US parent holds 74 per cent stake in Verizon Communications India Pvt Ltd, which operates as an internet service provider (without a gateway), undertakes training, web development and network integration in India.

The MHA said the Indian arm may be required to share data with Verizon Communications Inc, which in turn may be obliged to share the data with the American authorities.

In an application nearly two years earlier, Verizon’s India arm wanted approval to transfer 1,000 equity shares held by Verizon Asia Pacific Holdings Pte Ltd, based in Singapore, to Verizon European Holding Ltd in the UK, another non-resident group entity, as part of a group restructuring. This was rejected last year; Verizon had reapplied.

FIPB’s latest meeting concluded that sharing of data by Verizon Communications with agencies in the US while operating in that country was not unusual, unless the MHA could show that it had exceeded limits with respect to Indian data. Sharing of data by a parent company with the government of the country where it is doing business is applicable uniformly, the meeting felt. The same compulsion applies to foreign companies operating in India.

The MHA had not demanded a rejection of the application but said it was for FIPB to decide if their concerns were relevant for the data enterprise service provided by the company. And, whether or not to go by the department of telecom assurance that Indian telecom laws and regulations were effective enough to prevent any mischief or anti-national activities by foreign joint venture partners.

FIPB should ensure, the MHA had added, that if Verizon decided to provide other services like subscriber switching, covering individual mobile subscribers or internet services, it should take fresh approval for the licensing authority and comply with remote access guidelines.

Verizon’s earlier application was rejected by the FIPB on the ground of inadequate security clearance. The MHA had not commented on the application. The company sought reconsideration on the ground that it had been rejected after two years, that neither FIPB or the administrative ministries had raised any security concerns earlier and that it was not raising stake in the Indian arm.