C&W plan for local arm rejected

The government has rejected telecom equipment major Cable & Wireless Global's plans to convert its Indian branch office into a wholly owned subsidiary.

The Foreign Investment Promotion Board (FIPB) has rejected the proposal in its last meeting as the Department of Telecom (DoT) has raised multiple objections to the company's investment plans in the country.

DoT has pointed out that Cable & Wireless' India branch office continued various commercial activities as branch office of a foreign company even after FIPB objected to its plans.

The telecom department has pointed out that the business undertaken by Cable & Wireless earlier and the proposed additional activities can not be termed as information technology-related activities and may attract the provisions of the Indian Telegraph Act.

As per the present norms, if a company wants to undertake any activity, which are governed by the Telegraph Act, it will require a licence.

It was also pointed out that activities previously undertaken by Cable & Wireless's India branch office were not allowed as they were commercial in nature. This, according to the telecom department, is a violation of provision of FEMA with regard to branch office.

Further, the company had made 100 per cent foreign investment under automatic route for various activities including telecom services, which is in violation of the FDI guidelines, the telecom department has pointed out.

Cable & Wireless Global (India) was established under automatic approval route in 2001 as a wholly owned subsidiary of Cable & Wireless Eastern Hemisphere BV, the Netherlands.

In 2005-06, Cable & Wireless Eastern Hemisphere BV transferred its holding to another group company Cable & Wireless Group, which had a branch office in India since 1995.

Cable & Wireless Global (India), the proposed Indian subsidiary of the telecom equipment major, with paid up capital of Rs 50 lakh, wanted to undertake supply and services contracts related to integrated telecom and IT infrastructure projects.

The branch office, at present, undertakes business network services for corporate customers in India, business process outsourcing activities for the Cable & Wireless group and represents the company's products and services in the country.

The Reserve Bank of India had clarified in November 2002 that the branch office was not allowed to undertake the activity of telecom networking.

However, the Department of Telecom permitted the branch office to undertake ancillary telecom services such as network design.