Telecom investments hit FIPB roadblock

Greater scrutiny and cautious approach by different government departments are delaying foreign investment into the telecom sector, where several leading firms are under the Central Bureau of Investigation (CBI) scanner .

At least six such applications are pending — some for three months and some for as long as over a year — before the foreign investment promotion board (FIPB), the government arm meant to encourage and promote foreign investment.

Some of the pending foreign investment proposals include those from steel to software conglomerate Essar Group, Verizon Communications, Netmagic Solutions and Augere Communications.

According to industry sources — who spoke on condition of anonymity — at companies whose applications are pending, the delay is mostly on account of greater scrutiny by Indian home ministry as well as a “once bitter twice shy” attitude adopted by Indian government in light of the ongoing controversies around foreign investment in the telecom sector.

Emailed queries to Vijay Singh Chauhan, director, FIPB, did not elicit a response. Chauhan could not be reached on the phone either.

Several high profile foreign investors such as Dubai’s Etisalat DB, France’s Telenor and Russia’s Sistema have been dragged into investigations by CBI, which is looking into alleged irregularities in the way operating licences and radio waves were allocated in 2008.    

“We understand from our lawyers that there is a greater scrutiny by the authorities into applications for investing in the telecom sector,” said a senior executive said who asked not to be named.

“Given all the developments that the sector seen in the last six months or so, we are not surprised.”

The executive said that the operations will not be affected and that his current plans will be able to absorb up to about six months delay in the investment application being cleared.

The Telegraph newspaper reported on March 23 that the FIPB application of Verizon Communications has been delayed on account of home ministry’s clarifications regarding that firm’s operations in Pakistan.

An FIPB application from Essar Capital Holdings Ltd has been pending since January 2010. In its investigations into the so-called 2G scam, CBI has accused Essar of using Loop Telecom as a front for securing license and spectrum.

Essar is a 33% joint venture in the Indian operations of Vodafone, country’s third-largest cellular  services firm by subscribers.

“Some times the delay is on account of multiple follow-up queries from the home ministry and it could be something as simple as the details on the passport of a board member of the applying firm,” said another executive based on his knowledge of the process involved in clearing FIPB applications. This executive’s firm had a telecom sector foreign investment application cleared after much delay.

The only major telecommunications sector investment cleared by FIPB in the recent past is the Rs796 crore proposal from wireless chip-maker Qualcomm, which had won wireless spectrum for offering 4th generation or 4G broadband.

Last March FIPB had made it mandatory for applicants wanting to invest in telecom and defence sectors to disclose detailed information about its own as well as the foreign partner firm’s shareholding, board members, promoters - including their parentage.

The only major telecommunications sector investment cleared by FIPB in the recent past is the Rs796crore proposal from wireless chip-maker Qualcomm, which had won wireless spectrum for offering 4th generation or 4G broadband.

FIPB’s next meeting is on April 20.