DoT awaits govt nod on Egypt firm's FDI in Hutch

The Department of Telecommunications is awaiting the response of the ministries of finance, commerce and industry, and defence, before taking a final decision on Egyptian telecom company Orascom's indirect entry into Hutchison Essar.

The Prime Minister's Office has already said Orascom's entry poses a security threat to India.

Last month, the Essar group, which holds 33 per cent stake in the mobile service joint venture Hutchison Essar, had written to the DoT, the ministries and the PMO, asking whether any indirect or direct equity changes in Indian telecom companies needed approvals or clearances from relevant authorities.

The PMO's reply, sent by National Security Advisor MK Naryanan, has said Orascom's acquisition of 19.3 per cent stake in Hutch International last year, which also gave the Egyptian company a 12.19 per cent effective holding in Hutch Essar, is a threat to national security as this company is a dominant operator in both Pakistan and Bangladesh.

While maintaining that the new guidelines "clearly indicate that the foreign investment promotion board's approval is required for FDI in telecom companies", DoT sources said a final decision on the issue would be taken only after the other ministries submitted their comments.

The DoT is also of the view that guidelines provide that while approving FDI in telecom, the FIPB must first consider if the investment is coming in from "unfriendly" countries.

The PMO had upheld the views of the Essar group, which had said "such indirect change of shareholding through a holding company, without the consent of the serious Indian investors in the company, could constitute a threat to security and it will be difficult to hold the serious Indian investor responsible in such a situation", sources added.

When contacted, Essar executives said the company was yet to receive any feedback from each of the ministries and the DoT following its communication on February 22.