India widens access to telecoms

India has raised the limit for foreign direct investment in telecoms companies from
49% to 74%.

Communications Minister Dayanidhi Maran said that there is a need to fund the fast-
growing mobile market. The government hopes to increase the number of mobile users
from 95 million to between 200 and 250 million by 2007. "We need at least $20bn
(10.6bn) in investment and part of this has to come as foreign direct investment,"
said Mr Maran. The decision to raise the limit for foreign investors faced
considerable opposition from the communist parties, which give crucial support to
the coalition headed by Prime Minister Manmohan Singh. Potential foreign investors
will however need government approval before they increase their stake beyond 49%,
Mr Maran said. Key positions, such as those of chief executive, chief technology
officer and chief financial officer are to be held by Indians, he added.

Analysts and investors have welcomed the government decision. "It is a positive
development for carriers and the investment community, looking to take a longer-
term view of the huge growth in the Indian telecoms market," said Gartner's
principal analyst Kobita Desai. "The FDI relaxation coupled with rapid local market
growth could really ignite interest in the Indian telecommunication industry,"
added Ernst and Young's Sanjay Mehta. Investment bank Morgan Stanley has forecast
that India's mobile market is likely to grow by about 40% a year until 2007. The
Indian mobile market is currently dominated by four companies, Bharti Televentures
which has allied itself with Singapore Telecom, Essar which is linked with Hong
Kong-based Hutchison Whampoa, the Sterling group and the Tata group.