Posted by: Prem Piyush | February 4, 2005

Telecom Policy – a Paradigm Shift


P. Chidambaram’s decision to raise the Foreign Direct Investment (FDI) to 74 percent in telecom sector and plans to implement the universal licensing regime by the middle of year seems to give a new turn to the Telecom policy of finance ministry.

The collation Govt. with so much leftist outcry against the increase of FDI is being silenced by the PC’s statement that every possible outcome has been well studied as well as security concerns.
Main points are worth notable:

  • Majority of the directors including the chairman, MD, and CEO, “shall be” resident Indians.
  • Al least one investor will have to hold 10% of the equity.
  • Chief technical officer and chief technology officer “should be” resident Indians.
  • No call between two points in India can be routed via any place outside the country.
  • The company shall not transfer information on subscribers and details of infrastructure
  • The company must provide traceable identity of subscribers.
  • Network management and repairs cannot be outsourced outside the country.

At the same time the major players in the industry circumspect the possible outcomes after the universal license regime is implemented. And the universal licensing regime will allow the companies to offer additional services like television, internet and to VSAT links apart from telephony.

Major six players like BSNL, MTNL, Reliance, Tata, Bharati, Hutch in which the former two who are likely to be merged are aggressive to expand their network and value added services. For the telecom majors the FDI will certainly improve their operation performance. But the question is why the present govt. has to decide the increase in the FDI from 49 percent to 74 percent. The reasons are obvious need of huge investments of funds in the telecom sector as the different targets were set by the govt. By 2007, the national target of ‘250 million phones’, needs 1,60,000 crores and it’s impossible for Indian investors and FDI are needed. The Financial analysts are seeing it as a next step towards consolidation in the long run.

(The future prospects in the telecom sector in India, which is mostly dependent on electricity sector as a backbone. Now let’s see the govt. plans for the secotor. It’s seems a mirage but the policy if implemented there will be a major infrastructure reforms. To recapitulate in short,by the year 2012
1. the power demand of all Indian houses will be fulfilled.
2. Minimum consumption of electricity will be 1 unit per household per day as merit good.
3. Per capita availability of electricity is to be increased to over 100 units by 2012.

May we will live in a better India then if theories meet the practicals.

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