Investment cap in Indian telecommunications sector

India is of interest to foreign players in the telecommunications industry. Penetration in the huge country is still low, currently around 10% but up from 1% in the beginning of the 1990s. But you have to consider the one billion inhabitants to see the vast potential that this country has to offer. Even 10% equals 100 million users - and considering that growth is only tapering off when penetration reaches about 55%, one can understand the appetite of companies, such Singapore Telecommunications, Telekom Malaysia or even Maxis Communications, to participate in the growth.

In a new development and in line with its development objectives, the Indian government raised the foreign investment limit in the country's lucrative telecommunications sector from 49 percent to 74 percent, but also imposed conditions to address security concerns.

The conditions include: the company chairperson, CEO and the majority of directors on the board must be Indians; no domestic telephone traffic shall be routed from outside the country; and no user information, accounting information or infrastructure diagrams would be taken outside India.

Also, servers, networks and other databases cannot be accessed from overseas for repairs or maintenance.

Nevertheless, it is a landmark and allows the country and operating companies to raise funds for further investment. India needs US$20 billion of investment over three years to increase the number of mobile-phone users to between 200 million and 250 million. In addition, multiplier effects can be expected.

(By Asia Business Consulting)