The Commerce Ministry has objected to reducing the foreign direct investment cap for tower companies to 74 per cent.
At present tower companies are allowed 100 per cent FDI but a new proposal to bring tower companies under the unified licence regime will make it mandatory for them to bring it down to 74 per cent. The Commerce Ministry has said the proposal will send wrong signals to foreign investors.
“It is felt that a reduction in the FDI limit for infrastructure provider (IP-1) companies may not be an appropriate signal for investors in the telecom sector, in particular, and for foreign investors, in general at this stage, when India is actively seeking investments in infrastructure,” the Department of Industrial Policy and Promotion, under the Commerce Ministry, stated in a letter to the Department of Telecom.
Proposed policy
The proposal to bring tower companies under the unified licensing regime was first mooted by the TRAI. Under this proposed policy, tower companies such as Quippo and GTL would also have had to pay an annual revenue share of 8 per cent. At present infrastructure providers are not required to pay any licence fee. If the TRAI recommendations are implemented then American Tower Corporation will have to rope in an Indian partner to take 26 per cent stake in the Indian venture.
“While the TRAI has given detailed reason for subsuming IP-1 companies under the unified licence regime, adequate discussion of the impact of these recommendations upon the FDI regime for IP-1 companies is not available in the recommendations,” the DIPP note stated.
Earlier, an internal committee of the DoT had also raised concerns against lowering the FDI cap for tower companies. The panel said the TRAI should reconsider its views because it will adversely impact investments in infrastructure. The committee also observed that the Government has already deferred bringing tower companies under licensing regime. The stand taken by the Commerce Ministry would bring cheer to the tower companies that are opposing the move to bring them under the unified licence regime. The Ministry has said that the tower companies should not be forced to migrate but given the option to decide on whether or not they wanted to come under unified licensing.
The tower companies themselves don't want to be clubbed under the same policy which will regulate other segments of telecom including mobile companies and Internet service providers.
Financial crunch
Tower firms claim that they are already under severe financial pressure after several 2G players shut shop recently and any additional pay out would spell doom for the industry. “The proposal to bring infrastructure companies under the unified licence regime beats all logic. This will fold up the tower industry,” Mr Umang Das, Director General of Tower and Infrastructure Providers Association (TAIPA), told Business Line recently.
While the Union Cabinet has already cleared the broad principle of moving to a unified licensing policy, details on implementing it are yet to be spelt out by the DoT.