The Telecom Regulatory Authority of India (Trai) has suggested capping foreign holding at 74% in telecom tower companies, a proposal if accepted could dissuade buyouts by overseas companies.
The possible new rule will be significant for No.2 mobile carrier Reliance Communications, which is trying to sell its tower business unit to raise funds, and is said to be in talks with US private equity giants Blackstone and Carlyle .
It could also mean New York-listed American Tower, the only major foreign telecoms tower company in India, will have to look for a local partner when the proposal becomes rule.
A Reliance Communications spokesman said the company cannot comment on "speculations". American Tower could not be reached immediately for a comment.
India allows foreign companies to own up to 74% of mobile operators, but there is no restriction on holdings in tower companies. The regulator is now proposing to bring tower companies under the so-called "Unified Licence" regime that now covers only the carriers.
In draft proposals released last Friday, Trai sought industry comments on the "maximum time" that should be given to tower companies to comply with the new foreign holding conditions.
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After consultation with the industry, the regulator will send its final proposals to the government, which has to approve them before they become effective. The proposals are not binding on the government.
India's telecoms tower sector is highly fragmented although the top six companies control about 90% of the business.