Financial Daily from THE HINDU group of publications
Thursday, Feb 03, 2005
Industry & Economy - Foreign Direct Investment
Tatas upbeat; Hutch may consolidate operations
Mumbai , Feb. 2
INVESTMENT opportunities in India in the telecom sector are sure to get a higher priority with several potential investors from the international business and investment community, according to Mr Kishore Chaukar, Managing Director Tata Industries Ltd.
The hike in FDI limits in telecom is likely to benefit both the telecom service companies - Tata Teleservices and Idea Cellular in which the group has interests.
A consortium of foreign investors signed agreements to buy a stake of 47.7 per cent in IDEA Cellular some months ago; the stakes of the Tata and Aditya Birla groups in the company would subseequently be 24.7 per cent and 26.3 per cent respectively.
Both the Tata and A.V. Birla groupscould not relinquish any more shares in the company due to the earlier FDI limit of 49 per cent.
But keeping in mind the possibility that FDI in telecom might be increased, the consortium and the Indian shareholders in Idea also entered into an option agreement that enables Tata Industries and the Aditya Birla group to sell, and the consortium to purchase, their shares in Idea in the future, subject to certain conditions being met.
This could very well happen eventually, once the initial acquisition of 47.7 per cent stake is completed, feel industry analysts. The consortium consists of Singapore Telemedia and TM International. In the case of Tata Teleservices, the company has been speaking to several overseas telecom companies, largely south-east Asian ones, for a "strategic partnership."
In the case of the Hutch group in India, Hutchison Telecommunications International Ltd will hold 42 per cent direct stake and 14 per cent non-controlled and indirect stake in its India-operations when they are finally consolidated, according to submissions made by Hutchison Telecommunications International with the US securities regulator some time ago.
There are currently five GSM cellular operations in the country under the Hutchison umbrella.
Hutchison Telecom International holds 48.96 per cent direct stake and 0.35 per cent indirect stake in Hutchison Essar Telecom Ltd; 32.58 per cent direct and 26.65 per cent indirect stake in Hutchison Telecom East Ltd, 49 per cent and 16.5 per cent respectively in Fascel Ltd; 49 per cent and 25.12 per cent in Hutchison Essar South Ltd and an indirect 59.22 per cent in Aircel Digilink India Ltd.
The current equity cap for foreign investors in telecom in India is 49 per cent, but many Indian operations have more foreign stake holding through the indirect route. The FDI cap increase could smooth out these problems, they said.
The Reliance group refused to comment on the announcement.
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