DoT prepares to take call on FDI

This will come as a relief for telecom companies with up to 49 per cent foreign holding.

The department of telecommunication (DoT) has drawn up a proposal that only telecom companies with foreign direct investment (FDI) above 49 per cent have restrictions on foreigners as bosses.

The DoT is preparing two draft Cabinet notes: one based on the directive of the Prime Minister's Office for excluding telecom companies with FDI up to 49 per cent from the purview of conditions in Press Note 5, and another for laying down uniform terms for security.

Under Press Note 5, issued in November 2005, the government had imposed a number of restrictions on telecom companies on security grounds. The note had hiked FDI in telecom from 49 per cent to 74 per cent, but with various caveats that were to apply to all companies with foreign holding.

The policy, which had called for compliance by all operators by March 2006, was opposed by telecom companies as being too harsh.

While Tata Teleservices had Darryl Green, a foreigner, as its CEO, some others had tied up with foreign manufacturing companies to manage their networks, and the clause disallowing remote access from overseas would have come in their way.

As a result, the government pushed the deadline for compliance to July, and then to October 2, promising to take into consideration the industry's grievances.

The DoT's fresh proposal, however, differentiates between telecom companies with up to 49 per cent foreign holding and those with FDI above that level.

The latest move by the DoT, if cleared by the Cabinet, could be beneficial to companies like Tata Tele and Reliance Communications, whose foreign holding is well below 49%.

However, companies like Bharti and Hutchison-Essar, in which foreign holding is well above 49 per cent, will continue to be within the ambit of the guidelines.

Under Press Note 5, the chairman, managing director, chief executive officer, chief technical officer, and chief financial officer of these telecom companies had to be Indian citizens.

Secondly, no remote access could be provided to any equipment manufacturer outside the country for repair or maintenance work.

Also, operators had to obtain from roaming partners the traceable identity of their roaming customers when abroad. And, a resident promoter had to have a minimum 10 per cent equity in the firm.

Under the proposed policy, for telecom companies with up to 49 per cent FDI, foreign affiliates and equipment manufacturers would be allowed 24x7 remote access. However, an identified government agency would have to be intimated.

Similarly, while the majority of directors would still be Indians, in case key positions were held by foreigners, their names would have to be cleared by the home ministry.