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The Union Cabinet in its meeting today approved a proposal to enhance composite foreign holding in Telecom sector to 74 per cent. With this decision, the current FDI ceiling in the Telecom Sector in certain services (such as Basic, Cellular, Unified Access Services, National/International Long Distance, V-SAT, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added services, has been increased from 49 per cent to 74 per cent.
The total composite foreign holding will not exceed 74 per cent. This would include, but not be limited to, investments by FIIs, NRI/OCB, FCCB, ADRs, GDRs, convertible preference shares, proportionate foreign investment in Indian promoters/investment companies including their holding companies, etc. Thus, 74 per cent foreign investment can be made directly or indirectly in the operating company or through a holding company. Hence, the remaining 26 per cent will be owned by resident Indian citizens or an Indian Company. The Foreign Direct Investment cannot exceed 49 per cent and the management stays with the Indian owners. It is clarified that proportionate foreign component of such an Indian Company will also be counted towards the ceiling of 74 per cent. The licensee will be required to disclose the status of such foreign holding and certify that the foreign investment is within the ceiling of 74 per cent on a half yearly basis.
While enhancing the FDI ceiling, certain conditions have been put in place to safeguard the national interest. The salient conditions are:
a) The majority Directors on the Board including Chairman, Managing Director and CEO shall be resident Indian citizens. The Share Holder Agreements (SHA) shall specifically incorporate this condition and also envisage the conditions of adherence to Licence Agreement.
b) In order to ensure that at least one serious resident Indian promoter subscribes reasonable amount of the resident Indian shareholding, such resident Indian promoter shall hold at least 10 per cent equity of the licensee company.
c) Chief Technical Officer (CTO)/Chief Finance Officer(CFO) should be resident Indian citizens. The Licensor/DoT shall also be empowered to notify any key positions to be held by resident Indian citizens.
d) No traffic (mobile and landline) from subscribers within India to subscribers within India shall be hauled to any place outside India.
e) The Company shall not transfer the following to any person/place outside India:
i) any accounting information relating to subscriber (except for roaming/billing) (note: it does not restrict a statutorily required disclosure of financial nature);
ii) user information (except pertaining to foreign subscribers using Indian Operator’s network while roaming); and
iii) details of their infrastructure/network diagram except to telecom equipment suppliers/manufacturers who undertake the installation, commissioning etc. of the infrastructure of the licensee company on signing of non-disclosure agreement.
f) The Company must provide traceable identity of their subscribers.
g) No remote access shall be provided to any equipment manufacturer or any other agency outside the country for any maintenance/repairs by the licensee.
These conditions shall also be made applicable to the companies operating telecom service(s) with existing FDI ceiling of 49 per cent. With the above dispensation, the present provisions in FDI policy for investment company will no longer be applicable for Telecom sector as indirect foreign investment in the licensee company will also be counted towards sectoral cap of 74 per cent.
In case of not adhering to licence conditions now being imposed for addressing security concerns, the licence(s) granted to the company shall be deemed as cancelled and the licensor shall have the right to encash the performance bank guarantees and the licensor shall not be liable for loss of any kind.
DS/HS/HK/LV
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