The government of India has approved plans to allow full foreign ownership of local mobile networks hoping that foreign shareholders will pump increased investment into the market. Under the new regulations, foreign companies can grab 49% of any mobile network without conditions, while raising the stake above that will be subject to approval by the Foreign Investment Promotion Board (FIPB). Previously foreign companies would then be restricted in lifting their stake to 74%, but can now apply for full ownership.
According to PwC India’s Executive Director – Tax & Regulatory Services, Goldie Dhama, this will have a positive impact on the sector and foreign investors, which will no longer need to partner with Indian companies in order to comply with regulatory requirements. He added that foreign investors will now be able to infuse equity based on business needs instead of taking the debt route for funding growth.
In that sense, it’s worth noting that India’s mobile networks are laden down with high debt levels, largely due to the heavy investments needed that could not be funded by the local shareholders without diluting their stake below the legal limit. And thanks to this new regulations, a foreign investor will be able to pump cash into the companies, or allow local shareholders to sell their stakes entirely.
The major Indian networks with significant foreign shareholders include Vodafone (74%), Airtel (36.4%), Idea Cellular (19.1%), Tata Teleservices (26%), Aircel (74%), MTS (73.7%) and Uninor (67.25%).