TRAI May Lower FDI Cap On Telecom Tower Companies To 74% (15-Feb-2012)
India's telecom watchdog - Telecom Regulatory Authority of India (TRAI) has suggested that foreign holding in telecom tower companies be limited to 74%. If the proposal is accepted it could discourage buyouts by foreign companies. It could also impact Indian operations of NASDAQ-listed American Towers (ATC) and Reliance Communications, which is trying to sell its tower business unit to raise funds.
Currently, 100% foreign direct investment is allowed in tower companies but TRAI is keen to lower this and bring it on a par with other telecom services to bring all forms under a unified license regime. If implemented, existing infrastructure providers will be required to take new unified licenses whose conditions shall apply to tower companies as well.
ATC, the world's largest tower company, owns 100% of its Indian subsidiary and lowering the foreign investment cap will force it to change the shareholding structure of the Indian operations. Some telecom tower companies, including Reliance Infratel, are looking at stake sales and the 74% limit could impact their fund-raising plans.
TRAI wants the new cap to be part of the revised rules for the sector - the National Telecom Policy 2012 - which will replace the existing framework that has been in place for more than a decade. But any change in foreign investment norms will require Cabinet approval. The 74% foreign investment cap for tower companies is part of the draft rules, which were shared with both the industry and the telecom department over the weekend.
The regulator has asked the industry to specify the maximum time frame that should be given to comply with the new foreign investment cap. After discussion with the industry, the regulator will send its final proposals to the government, which has to approve them before they become effective. The proposals are not binding on the government.
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