India entry may get tougher for foreign telecom firms

Govt likely to make security clearance mandatory for telcos irrespective of equity holding before giving licences; DoT members to meet today

The government has proposed to make security clearance mandatory for foreign telecom companies, irrespective of the equity they intend to own in their Indian venture.

At present, foreign telecom companies do not need a security clearance for entering India with up to 49 per cent equity holding. For stakes above that, the proposals are vetted by the Ministry of Home Affairs before being cleared by the Foreign Investment Promotion Board (FIPB).

The rule would be applicable only for new ventures.

Members of the department of telecommunications (DoT) are scheduled to meet on Thursday to discuss the recommendations of the Committee of Secretaries on the issue.  The committee has also said key executives like the chairman, managing director and chief finance officer would also need to be vetted before a licence is issued. Now, these permissions can be taken after a telecom company gets its licence.

SECURED PATHWAY

• Clearances to be mandatory irrespective of foreign telecom companies’ equity
• Key executives’ appointments to need vetting before licence is issued
• Clearances to be valid for five years
• Foreign personnel involved in installation, operation and maintenance too need clearance
• Department of Telecommunications to meet on Thursday to discuss recommendations

According to the recommendations, companies should get the security clearance before the DoT issues licences. The clearance will be co-terminus with the licence, but the government can revoke it if the situation demands. Key executives must be screened every five years.

The Committee of Secretaries has also recommended security clearances for foreign personnel deployed for installation, operation and maintenance of the licensee’s network.

However, foreign telecom operators who have stakes in Indian ventures, like Vodafone, Sistema, Telenor, Axiata, Singtel, would not be affected. Even equipment vendors, such as Ericsson, NSN, Huawei, ZTE, Cisco, Juniper, would not be impacted. The rule would be applicable only for new ventures.

The government had said last July that executives of companies in strategic sectors like telecom who worked in Pakistan would not be permitted to work in India.

FIPB had then cleared a proposal by Norwegian telecom major Telenor to increase its stake in its Indian company Telewings Communications Services Pvt Ltd from 49 per cent to 74 per cent with the ban on staff who had worked in Pakistan.

Singtel, which has a stake in Bharti Airtel, also own 30 per cent equity in Warid that operates in Pakistan. Axiata has a stake in Idea Cellular and 89 per cent holding in Multinet, which runs an optical fibre cable network connecting major cities in Pakistan. Telenor has a fully owned telecom services company in Pakistan.

Other foreign telecom companies operating in India include Russia’s Sistema and equipment vendors like Ericsson, NSN, Huawei, ZTE, Cisco, and Juniper.