India has changed its rules regarding the percentage of foreign ownership allowed in its giant telcos. At present local ownership must limits foreign ownership to 74 per cent. Once ratified the new rules permit 100 per cent, however a non-Indian company will be limited to a 49 per cent stake. The balance no longer need be Indian registered or based but will be subject to approval by India’s Foreign Investment Promotion Board (FIPB).
The news came as Telenor’s Uninor operation in India has been cleared to increase its FDI stake to 74 per cent. Other international players involved in the Indian market include Vodafone.
“There is an expectation for further consolidation and buyouts in the telecom space, as cash-rich foreign telcos might seek to buy out smaller players after the entry barriers have been significantly reduced,” said Prashant Singhal, a partner at Ernst & Young India, in the report. “In the longer term, this will enable additional capital inflows and accentuate the overall financial viability of the telecom sector.”