The government has eased foreign investment norms for India’s telecom sector. Henceforth, the total composite foreign holding (including investments by FIIs, NRIs, FCCBs, ADRs, GDRs, convertible preference shares, proportionate foreign investment in Indian promoters / investment companies including their holding companies, etc.) can go up to 74%. The remaining 26% must be owned by resident Indian citizens or an Indian Company. An Indian company for this purpose is one in which foreign direct investment does not exceed 49% and the management is with the Indian owners. However, proportionate foreign component of such Indian companies will also be counted towards the ceiling of 74%. In other words, if the shareholder of the Indian partner is a foreign company, it would count towards the 74% ceiling of the licensee company. The total holding of Indian public sector banks and Indian public sector financial institutions will be treated as ‘Indian’ holding.

Telecom licensees must, on a half yearly basis, disclose their foreign holding and certify that the foreign investments are within the ceiling of 74%. Existing licensees have been allowed a period of four months to comply with the 74% cap.

The government has also prohibited licensees from providing remote access to any equipment manufacturer or other agency outside the country for any maintenance / repairs. However, such access may be allowed in case of catastrophic software failure, which results in a major part of the network becoming non-functional for a prolonged period, subject to fulfillment of certain conditions.

India’s telecom sector has witnessed strong growth in recent times. With about 110 million telephone connections, teledensity has reached almost 10 telephones per 100 people. The government’s target is 250 million telephone connections by the year 2007.