Telecom Prospects brighten due to favourable policies in 2013

Telecom sector seems back on its feet with initial investment proposal of over Rs 11,000 crore received in 2013

With foreign investment dropping by a steep 96% in 2012, the Department of Telecom is hoping to annouce the new M&A guidelines next month as it attempts to infuse life into a sector battered by controversies.

After a two year run-in with controversies, telecom sector now looks stable and seems back on its feet with initial investment proposal of over Rs 11,000 crore received in 2013.

While government is hopeful of announcing mergers and acquisitions guidelines in January and a new policy on machine -to-machine communications in first quarter of 2014, in 2013 it was able to implement new licensing regime of Unified Licences, open up telecom sector for foreign investment by raising FDI limit to 100% from 74%.

"We want to put mergers and acquisition guidelines in place before (spectrum) auction takes place. The year 2013 was basically a year which prepared this sector for huge growth in coming years... A foundation year. Sector in 2014 is poised for a very positive growth riding on very good sentiments," Telecom Secretary MF Farooqui told PTI.

The secretary said that de-linking spectrum from telecom licences, introduction of Unified Licences and raising of foreign direct investment limit were key steps that government took for the sector during the year.

"It (100% FDI) may immediately not result in influx of investment. It actually did, but even without it in terms of improving sentiments, it made an important contribution. It made people look at fresh opportunity in terms of investment in the sector," Farooqui said.

The government in August approved 100% foreign direct investment (FDI) in the telecom sector, meeting a key demand of the fund-starved industry. Earlier, the FDI cap in the sector was at 74%.

FDI during April-September 2013 period was only at Rs 197 crore. The month of March, this year, saw poor performance of spectrum auction with only one company, Sistema Shyam Teleservices, bidding for CDMA spectrum worth Rs 3,639 crore.

Within three months of the decision on FDI, UK's telecom major Vodafone Group approached Foreign Investment Promotion Board (FIPB) to increase its holding in Vodafone India Ltd (VIL) from 64.38% to 100% with an investment of Rs 10,141 crore.

"There is progress in the regulatory environment...There are reasonable expectations on the sector which I think is positive, so it's sending a positive message about the country and about the desire to really push forward," Vodafone Group's hief Executive Vittorio Colao said.

Vodafone's investment is yet to be approved by the government.