With the full Telecom Commission favouring 100 per cent FDI in telecom,the decks have been cleared for a slew of stake transfers. While all potential companies have denied any deal is in the works,or said that it is early days yet,the most likely transactions are those involving MNCs with Indian minority partners who help meet the current stipulation that 26% equity be held by Indians.
While the full Telecom Commission includes representatives from the Planning Commission,the finance ministry and DIPP,this leaves the home ministry as the big dissenter. The proposal,along with others made by the Mayaram committee,will be considered by the Cabinet later this month.
The commission has favoured 100 per cent FDI in telecom through the approval route where an FIPB nod will be required,while up to 49% foreign investment can be made through the automatic route, said a senior DoT official.
Top on the list of companies where deals are possible is Vodafone where 25% of the equity is held by companies controlled by Vodafone India chairman Analjit Singh Vodafone Plc owns 49% of these companies.
In the case of RCom,where talks are on for a deal with South Africas MTN,a 74% stake sale can go ahead even as FIIs own 7.95% of RCom shares.
In the case of Norwegian firm Telenor,26% of its Indian operations Uninor is owned by Sudhir Valias Lakshdeep Investments and in the case of MTS,24% is owned by Indian partner Shyam Telecom. Telenor said it is too early to take a decision on buying out its 26% Indian partner.
Most of these companies have domestic partners to meet FDI requirements; so,they will use the opportunity to gain complete ownership. While 74% is enough for management control,100% ownership is always better, said Neeraj Jain,senior director at Deloitte Haskins & Sells. However,another analyst felt that with the lack of clarity on guidelines on mergers and acquisitions and no clear roadmap on spectrum re-framing,investor interest might be lukewarm.
In several cases,while the foreign entity is keen to scale up,Indian partners dont have the required funds; so,allowing 100% FDI will be a big help especially since,after the Telecom Regulatory Authority of India comes up with its recommendations on the base price for 2G auctions,investments in the sector are likely to pick up again.
Sistema Shyam Teleservices,where Sistema holds 57%,the Russian government 17.14% and the Indian partner Shyam Telecom close to 24%, said the decision is pro-industry and pro-consumer. With fresh FDI coming in,this would further catalyse the process of proliferation of telecom services across the country, a company spokesperson said.
Telcos have been burdened by heavy debt taken to buy spectrum and roll out 3G and 4G services. A presentation by GSM industry body COAI shows the sectors borrowings stood at Rs 1,85,720 crore at end of FY12, including Rs 93,594 crore from domestic sources and Rs 92,126 crore from overseas.