FOREIGN DIRECT

INVESTMENT IN TELECOM

FDI IN TELECOM

GROUP 9
APARNESH MITRA
JOY GUPTAN
PV DHANASREE
SHARIQUE AHMAD KHAN
VIDYASAGAR MEHTA
 INTRODUCTION
• Foreign Direct Investment. Direct
investment in to production or business in a
country by an individual or company of
another country
• Determinants of FDI
• Quantity & quality of labour pool
• Wage rate
• Regulatory & legal environment
• Size of market
• Physical infrastructure
• Political stability & tax regime
 HISTORY OF TELECOM
• Prior 1990 India implemented import
substitution strategy
• In 1991 Foreign Exchange Reserves ran low
• Post 1991 Govt implemented structural
adjustment plan for long term economic growth
• Telecom initially owned by state owned
enterprise
• Post 1990 liberalization of economy led to
significant inflow of investment in telecom
sector
 ADVANTAGES OF FDI
• Increase in Domestic Employment / Drop in
Unemployment.
• Investment in Needed Infrastructure.
• Positive influence on the Balance of
Payments.
• New Technologhy and “know how” Transfer.
• Increased Capital Investment.
• Targeted Regional and Sectoral
Development .
 DISADVANTAGES OF FDI
• Local firms may loose business because of the
attained power of the foreign firm.

• Repatriataion of Profit may drain out the captial

of the host country.

• Local population may be displaced out of their

jobs if they are unable to cope with the
technologically advanced foreign firm.

• Dependence on foreign technology sources.

“India’s telecom sector has attracted a Foreign
Direct Investment (FDI) worth $6.2 billion (Rs
43,400 crore) in 2017-18 fiscal”

“FDI in the telecom sector has jumped nearly

five times in the last 3 years – from $1.3 billion
in 2015-16 to $6.2 billion in 2017-18,”

Telecom Minister Manoj Sinha

 POLICY SUPPORT

• Govt of India unveiled the ‘National Digital

Communications Policy’ in September 2018.

• The policy aims to attract US $100 Bn worth

of investments and generate 4 million jobs
in the sector by 2022.
 POLICY SUPPORT
"Going forward, foreign companies operating in
India in any of the 4 sectors, namely, Defence,
Telecom, Private Security and Information &
Broadcasting and operating under government
approval (for FDI) or under a license/
permission from the nodal ministry/ regulator
will not require any additional approval from
RBI for establishing the foreign company's
extension office in India"

Finance Minister Arun Jaitley

 EXECUTIVE SUMMARY
Second-Largest Subscriber Base
Subscriber base of nearly 1,201.72 million
Third-Highest Number of Internet Users
429.23 million internet subscribers
Most of the Internet Accessed through Mobile Phones
7 out of 8 users access internet from their mobile


phones


Rising Penetration Rate

Urban tele-density stood at 171.08 per cent and rural


tele-density at 56.94 percent

Affordability and Lower Rates 

Affordable smartphones and lower rates are expected to

drive growth in the Indian telecom industry
Source: Telecom Regulatory Authority of India, Aranca Research
 CUMULATIVE FDI INFLOW
• Cumulative FDI inflows into Cumulative
Visakhapatnam
FDI inflows into
port
telecommunication
traffic (million tonnes)
(US$ million)

the telecom sector over 35,000

April 2000 – 30,000

30,030
September 2017, totalled to 25,000

US$ 30.03 billion.

23,946
20,000

18,382
17,058
15,000

• During this period, FDI into

14,163
12,856
12,552
10,000

10,589
9,872
the sector accounted for a 5,000

share of 8.40 per cent of 0

FY10

FY11

FY12

FY13

FY14

FY15

FY16
total FDI inflows into the

FY18*
FY17
country.
Source: Department of Industrial
Policy and Promotion (DIPP); * Data
as of September 2017
 TELECOM SUBSCRIBER BASE
India’s telephone Visakhapatnam
Growthport traffic
in total (million tonnes)
subscribers

subscriber base 1,400

92.98 92.92
100

90
expanded at a CAGR of 1,200 78.7 77.5879.38
83.36

1201.72
1194.58
74.02 80
70.9

19.22 per cent, reaching

1058.86
1,000 70

996
951.34

898.02
60

1,194.58 million during 52.7

846.32

846.32
800
50

FY07–17. 600 37

621.28
40

26.2 30
400

429.72
Tele-density (defined 18.3
20

300.49
200

as the number of

FY07 205.86
10

0 0

FY13

FY16

*FY18
FY08

FY09

FY10

FY11

FY12

FY14

FY15

FY17
telephone connections for Telephone Subscriber (in million) Teledensity

every 100 individuals),

increased from 18.3
*
Note: CAGR - Compound Annual Growth Rate;
Data till October 2017
percent in FY07 to 92.92 Source: Telecom Regulatory Authority of India
percent in FY18.
FOREIGN DIRECT INVESTMENT FLOWS TO INDIA:(US$ mn)
Source/ Industry 2013-14 2014-15 2015-16 2016-17 2017-18

Communication Services 1,256 1,075 2,638 5,876 8,809

Manufacturing 6,381 9,613 8,439 11,972 7,066
Retail & Wholesale Trade 1,139 2,551 3,998 2,771 4,478
Financial Services 1,026 3,075 3,547 3,732 4,070
Computer Services 934 2,154 4,319 1,937 3,173
Business services 521 680 3,031 2,684 3,005
Electricity and other energy Generation,
1,284 1,284 1,364 1,722 1,870
Distribution & Transmission
Construction 1,276 1,640 4,141 1,564 1,281
Transport 311 482 1,363 891 1,267
Miscellaneous Services 941 586 1,022 1,816 835
Restaurants and Hotels 361 686 889 430 452
Real Estate Activities 201 202 112 105 405
Education, Research & Development 107 131 394 205 347
Mining 24 129 596 141 82
Trading 0 228 0 0 0
Others 293 232 215 470 226
 SURGING TELECOM REVENUES
Indian telecom sector’s
revenue grew at a CAGR of Visakhapatnam portRevenue
Telecom Sector traffic (million tonnes)
(US$ Billion)

7.31 per cent from US$

2CAGR 7.31%
45

19.6 billion in FY06 to US$

42.6
41.7
40

40.8

39.2
39.1

38.8
37.7
35
42.6 billion in FY17. During

33.3
33.2
32.1
30

the first half of FY18, gross 25

revenues of telecom sector

23.3
20

20.4
19.6
in India reached US$ 20.4 15

10
billion. 5

1
FY 15

FY 16
FY 06

FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 17

FY 18
Revenues from the
telecom equipment are Note: CAGR - Compound Annual Growth Rate; FY – Indian Financial

expected to grow to US$ Year (April – March); Figures mentioned

1

available, Up to September 2017, CAGR is till FY17

2
are as per latest data

Source: Telecom Regulatory Authority of India, Aranca Research

26.38 billion by 2020.
 2G SPECTRUM ALLOCATION
CASE
• World’s second biggest abuse of Executive
Power (Time Magazine, May 2011)
• 22 Telecom Zones – 281 Zonal Licenses
• 122 2G Licenses granted

• 2001 Spectrum prices instead of auctioning

• CAG assessment – Rs 1.76 Trillion (US $24

million
 2G SPECTRUM ALLOCATION
CASE
• CBI Charge sheet
• Several Laws Violated
• Bribes paid to favour certain firms

• CAG Audit
• Licenses granted to ineligible operators
• No experience in Telecom
• Relevant information concealed
 2G SPECTRUM ALLOCATION
CASE
• Then PM’s advisory on free and fair auction
and price revision ignored
• Concerns of MoF on procedural issues also
ignored
• Cut off date altered from 01 Oct to 25 Sep 07

• 10 Jan 08 – Window from 1530h to 1630h

 2G SPECTRUM ALLOCATION
CASE
• Accusations against A Raja

• Altering cut off dates

• Arbitrarily refining policy of first-cum-first
served policy
• Sold licenses instead of auctioning
• All accused finally exonerated since
prosecution could not provide incriminating
evidences
 CONCLUSION
• The government increased FDI in the telecom
space to 100% and the sector is witnessing
steadily growth since then.
• FDI in the telecom sector has jumped nearly
five times in the last 3 years – from $1.3 billion
in 2015-16 to $6.2 billion in 2017-18
• The provisional statistics released by the
Reserve Bank of India (RBI) last month has
indicated India’s communications services
segment received $8.8 billion (around Rs
63,000 crore) worth of investment in FY 2018.
 CONCLUSION
• The government is aiming the commercial
rollout of fifth-generation or 5G services by
the end of 2020.
• The newer technology is expected to bring in
potential investments in the country with an
array of multinationals expressing interest in
the enterprise applications and utility
services.
• A stable, transparent and a non
discriminatory regulatory system is the best
way to attract more FDI.