Telecom firms differ on FDI cap

The Indian telecom industry is divided on the need to relax the foreign investment cap in the sector from 49 per cent to 74 per cent.

While companies like Tata Teleservices, Bharat Sanchar Nigam and Reliance Infocomm say the move does not have any link with the growth in the sector, Bharti, Hutchison and investments bankers like ABN Amro, ICICI Bank and HSBC feel the FDI cap was one of the factors that could hinder future growth.

Speaking at the CII telecom summit, Kishore Chaukar, managing director, Tata Industries, said: "I don't think that the cap on FDI limit has any impact on Tata's telecom plans as of now. If we have made expansion plans under the existing regime then those plans would be implemented irrespective of the FDI policy."

Vikram Mehmi, chief executive officer, Idea Cellular, said: "FDI has not been a limiting factor so far in the growth of telecom sector as there are ways to get around the cap."

N P Singh, the official looking at foreign investment promotion policies in department of telecom said: "80 per cent of the FDI in telecom came in the 1990s when the sector was growing at about 20 per cent. However, the real growth has happened in the recent past when the growth is nearly 80 per cent while the FDI inflow is only 20 per cent of the total received till now".

On the other hand, Vijay Chopra, executive director, ABN AMRO Bank, said The telecom sector required an investment of around $10 billion and relaxing the foreign investment cap would go a long way in attracting funds into the sector.

Sanjay Mehta, consultant, Ernst Young, said that the FDI cap in telecom sector was one of the factors inhibiting growth.

"Restrictions on foreign equity holding continue to hamper the fund raising ability of the sector and the government needs to rapidly address this situation," he said.

Mohit Batra from ICICI Bank said there was huge potential in the telecom market but, when compared to China, India lags behind.

"China has attracted foreign investments worth $20 billion while India has got only $2 billion FDI," Batra pointed out.