India issues phones guide: 49% ceiling set on foreign investment
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Your support makes all the difference.NEW DELHI (Reuter) - Overseas companies seeking to tap India's huge telecommunications market have welcomed new guidelines announced for foreign entry in basic telephone services and said they will help firm investment plans.
Only local firms will be permitted to provide basic telephone services, but foreign firms can hold up to 49 per cent in joint ventures.
An independent regulatory body will regulate prices and work out a revenue-sharing formula between different operators.
Private firms will be licensed for 15 years, but the state-run Department of Telecommunication will continue to monopolise domestic long-distance networks for at least five years.
Twenty local and foreign telecommunication companies, including BT, Motorola, US West, AT&T and France Telecom, are keen to invest in India's laggard telephone system as demand balloons with the opening up of the economy.
The telecommunication minister, Sukh Ram, said the long- awaited guidelines would help pull in investment to bring telephones to India's rural and urban centres.
'The government is hopeful that the guidelines will usher in an era of massive investment by the private sector in the expansion and modernisation of telecommunication services.'
India's demand for telephones has shot up 50 per cent in the past three years because of its economic reforms. Demand increased to 10.5 million lines in early 1994 from 7 million in 1992, and will reach 16 million by 1997 as economic activity increases.
A US West spokesman said the guidelines appeared to ensure that telephone density would increase rapidly. It has already announced plans to invest in Indian ventures with BPL.
Sprint International, based in the US, already provides value- added and reverse charge servics in India. It said the new guidelines would help it prepare its business plan for entry into basic services.
'It would help formalise our business plan for India. We shall now take a closer look at providing basic services,' the company said.
But Amit Sharma, Motorola's executive director, south and central Asia, said he was disappointed with the guidelines because they opened up basic services on only a limited scale.
'In most countries where basic services are opened up, the long- distance and international lines are the first to be opened as these are seen to cross-subsidise the local loop,' Mr Sharma said.
'There seems to be little logic that private companies can only operate the local loop as this is the least profitable part of the network operations.'
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