India mulls eliminating cap on foreign investment in telcos

Summary:A inter-ministerial body looks likely to take up a proposal to raise the foreign direct investment cap to 100 percent from 74 percent, in a bid to alleviate the huge debts weighing down on local telcos.

India's Telecom Commission is considering a proposal to lift the foreign direct investment limit in the sector from 74 percent to 100 percent.

The Hindu reported on Monday that the Telecom Commission, an inter-departmental body with financial and administrative powers, is meeting today to decide whether the foreign ownership cap should be lifted. It had previously been raised to 74 percent from 49 percent.

telco-satellite
The cap on foreign investment in telcos could be lifted entirely.

The move was recommended by a high-level committee on financing infrastructure, which sought a fresh injection of funds to lower telcos' financial burden. Before making the final decision on this, the Department of Telecoms has sought the views of the Home Ministry, and related security agencies.

The cellular operators association of India (COAI) recently revealed the debt of the telecom sector stood at US$30.9 billion (1.9 trillion rupees) by the end of the 2012 financial year. Almost half of this was from international creditors.

Meanwhile, Reliance Telecom revealed on July 1 that it fully repaid loans amounting to US$1 billion (60 billion rupees) in the three months to June 30. According to The Hindu, the telco still owed creditors US$6.5 billion (388 billion rupees).

"RCom's foreign currency debt is steadily declining every year, and the interest outgo on such debt is fully covered by US dollar denominated earnings from the Reliance Globalcom business," the company said in a statement.

Following the news, the company's share price jumped 12.15 percent. at the close of Monday trading.

Topics: Telcos, India, Networking

About

Mahesh Sharma earned his pen licence in his homeland, where he covered the technology industry for ZDNet, SMH, Sky Business News, and The Australian--first as an FTE, and later as a freelancer. The latter fueled his passion for startups and empowered a unique perspective on entrepreneurs' passion to solve problems using technology. Armed... Full Bio

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