In this article, Binayak Ransingh pursuing M.A, in Business Law from NUJS, Kolkata discusses FDI In Indian Telecom Sector.

India is the second largest telecommunication market and third highest in terms of number of internet users in the world. During FY07-16, telephone subscribers increased at a CAGR of 19.96%, reaching 1058.86 million. The tele-density was at 83.36% by 2016.

According to GSM Association in collaboration with BCG has expected that the Indian mobile economy will grow rapidly and will contribute substantially to India’s GDP. India has become the fourth largest app economy in the world. Government has also enabled easy market access to telecom equipment and framed a proactive regulatory framework which ensures availability of telecom services to consumer at affordable prices. Government has deregulated Foreign Direct Investment norms, which further had made the sector one of the fastest growing and top five employment opportunity generator in the country. According to International Data  Corporation (IDC) predicts India will be overtaking U.S. as the second largest smart-phone market globally. It is expected that the mobile industry will create a total economic value of Rs 14 trillion by the year  2020 and would generate around 3 million and 2 million direct and indirect job opportunities respectively by 2020. The year on year growth of the mobile user has crossed 11% in September to December quarter of 2016. The Erricsion mobility has expected a fourfold growth of smart-phone subscription by 2021.

The growing trend has also motivated foreign investor to invest money in the sector. The industry has fetched FDI worth $23.95 billion during the period April 2000 to March 2017 (Data released by Department of Industrial Policy and Promotion (DIPP).

Some of the key development in the industry:

1. Reliance Industries Limited plans to invest additional sum of Rs. 18,000 crore which will add up to a total investment of Rs1.9 trillion on its telecom arm, Reliance Jio to expand its fibre network.
2. Nettle Infrastructure Investment Ltd. Subsidiary of Bharti Airtel plans to acquire 21.63 % in Bharti Airtel Ltd for a sum of Rs. 12,400
3. Bharti Airtel Ltd. Decide to buy Tikona Digital Networks Pvt Ltd’s 4G business for approximately Rs.1,600 crore. This will also includes its broadband wireless access spectrum and 350 cellular sites in five telecom
4. Bharti Airtel will buy Telenor’s India operation in seven circles to receive 43.5 MHz spectrum in the 1800 MHz band.
5. Apple produces its iPhone SE at new facility in Bengaluru owned by its partner
6. Ortel communication invested around Rs 300 crore for upgrading its infrastructure in
7. Reliance Communication Limited (RCom) has signed a binding agreement with Brookfield Infrastructure Partners to sell a 51% stake in Reliance Infratel, RCom’s tower unit for Rs 11000 crore.
8. Oppo and Vivo planned to invest Rs4000 crore to setup a manufacturing capacity at Uttar Pradesh.
9. Samsung India has expanded its service network to over 6000 talukas across the

Government Initiative:

It has fast tracked reforms in the telecom sector and continues to be proactive for the growth of the telecom sector. Some of the key initiatives taken are as follows,

1. The Telecom Regulatory Authority of India (TRAI) identifies issues that makes difficult to do business in Indian telecom sector, like sector allotment, license acquisition and review them regularly.
2. Of India has planned to auction 5G spectrum in bands like 3300-3400 MHz to promote Internet of Things, machine-to-machine communication, instant high definition audio transfer, as well as to promote smart cities.
3. The government has launched a phased manufacturing program (PMP) under which components of mobile will be manufactured under the Make in India initiative, which will further give a push to domestic manufacturing of mobile
4. The government of India has allocated Rs.10000 crore for rolling out optical fibre cable and procuring equipment for the Network for Spectrum project 2017-18.

Foreign investment in the telecom sector

1. Vodafone received the highest ever foreign investment i.e Rs. 47000 crore from its parent company at U.K. In last 15 years the sector has received $18.4 billion as FDI equity inflow, making it the fourth highest sector attracting foreign investment. Mauritius topped the list of the highest FDI source in India with the amount of $12 billion in these 15
2. Swedish telecom equipment maker Ericsson announced the introduction of a new system in the Indian
3. Foxconn has signed a memorandum of understanding with the Maharashtra government to invest $5 billion in next three years for setting up manufacturing between Mumbai and

Total inflow of FDI in telecommunication sector

Subscriber of telecommunication sector

Number of subscriber for major telecom companies

Subscriber of telecommunication sector

Year	Populatio n             of country (million)	Total        subscriber       Of telecommunication sector		Subscriber of telecommunication sector
		Million	Growth rate            in percent	Rural (million)	Urban (million)	Public	Private
2005-06	1117.73	163.09	–	40.17	122.92	42.99	57.01
2006-07	1134.02 (101.46)	249.88 (153.22)	53.21	36.14 (89.97)	213.74 (173.88)	34.68 (80.67)	65.32 (114.58)
2007-08	1150.20 (102.9)	351.62 (215.60)	115.60	62.28 (155.04)	289.34 (235.39)	36.47 (84.83)	73.13 (128.27)
2008-09	1166.23 (104.34)	488.60 (299.59)	199.59	111.63 (277.89)	376.97 (306.68)	20.84 (48.48)	79.16 (138.85)
2009-10	1186.00 (106.11)	687.54 (421.57)	321.57	190.88 (475.18)	496.66 (404.05)	17.28 (40.19)	82.72 (145.1)
2010-11	1210.57 (108.31)	921.32 (564.91)	464.91	273.54 (680.95)	647.78 (526.99)	14.89 (34.64)	85.11 (149.29)
2011-12	1213.37 (108.56)	1032.68 (633.2)	533.20	323.27 (804.75)	709.41 (577.13)	13.69 (31.84)	86.31 (151.39)
2012-13	1223.58 (109.47)	986.51 (604.89)	504.88	342.50 (852.63)	644.01 (523.93)	14.49 (33.71)	85.51 (150.0)
2013-14	1238.89 (110.84)	1258.11 (771.42)	671.42	377.78 (940.45)	880.33 (716.18)	12.87 (29.94)	87.13 (152.83)
2014-15	1254.02 (112.19)	1313.81 (805.57)	705.57	398.73 (992.61)	915.08 (744.45)	10.85 (25.24)	89.15 (156.38)
Avg.	1189.46	745.32	–	215.69	529.62	21.90	79.10

Players in the market

1. BSNL is the market leader in the Indian telecommunication market with a market share of more than 65% followed by MTNL with 11.5%. Bharti Airtel, Tata and Reliance have a market share of 10.9%, 5% and 4.1%
2. As of 2014, BSNL has the revenue of $4.5 billion and is serving more than 120 billion people in the country. It also acts the catalyst to check the price point of telecom
3. BSNL is a 100% Central Government entity and the employees of the company are paid with salarie and incentives decided by the government not the
4. Both BSNL and MTNL are witnessing a declining revenue associated with high cost. BSNL has the massive telecommunication infrastructure and 80% of landline and 90% of broadband connections in India are operated by
5. Vodafone, the parent company situated at U.K. is investing a huge amount nearly $ 3 billion to gain a bigger market share in the
6. Blackberry had also setup enterprise solution centre to educate corporate customers about various BlackBerry Enterprises
7. Tata teleservices plans to setup nearly 4,000 wi-fi hotspot in nine cities across the country in next two

The telecommunication sector has supported the socio economic development of India and has played a significant role to narrow down the rural urban digital divide to some extent. The exponent growth witnessed by the telecom sector in past decade has further developed the telecom equipment manufacturing and other supporting industries. From being an import-centric industry, it is slowly steadily moving towards becoming a global telecom equipment manufacturing hub.

As per the Times of India Business report, the government is planning to reach the telecom products and services exports to $10 billion in next 5 years. At present the telecom exports touches Rs32000 crore, in which Rs 20000 crore is product and the rest is contributed by the services.

Government initiatives for the growth of the sector

1. The ministry of communication and information technology has launched Twitter Seva, for registration and resolution of user complaints in the telecommunication and postal
2. The telecom regulatory authority of India has released a constitution paper which aims to offer consumers free internet services within the net neutrality framework. It has also further proposed three models for free data delivery to customers without violating the regulations.
3. The government of India liberalised the payment terms for spectrum auctions by allowing two options of payments to telecom companies for acquiring the right to use spectrum such upfront and instalment based
4. The department of telecommunication amended the Unified Licence for telecom operations which will allow sharing of active telecom infrastructure like antenna, transmission system, feeder cable between operators, which further reduces the cost of operations and leading to faster rollout of
5. The telecom regulatory authority of India (TRAI) recommended a Publi-private partnership model for BharatNet and the Central government ambitious project to set up broadband connection in rural
6. The ministry of skill development and entrepreneurship signed a memorandum of understanding with department of telecommunication develop and implement National action plan for skill development in telecom sector with the objective of providing the sector with skilled manpower and providing job opportunities in the
7. The telecom regulatory authority of India has directed the players to compensate the customer for the dropped

Telecom subscriber as on 31st October 2016 Wireless

1. Total telephone subscriber (million): 1078.42 Net Addition in October 2016 (million): 28.68 Monthly growth rate: 73%
2. Urban telephone subscribers (millions): 621.77 Net Addition in October 2016 (million): 17.96 Monthly growth rate: 97%
3. Rural telephone subscriber (Million): 456.66 Net Addition in October 2016 (million): 72
4. Monthly growth rate: 2.40%
5. Overall tele-density: 84.34 Urban tele density: 155.35 Rural tele density: 98
6. Share of urban subscribers: 57.66% Share of rural subscribers: 42.34%
7. Broadband subscribers (millions): 49

Wireline

1. Total telephone subscriber (million): 24.52 Net Addition in October 2016 (million): 0.02 Monthly growth rate: 10%
2. Urban telephone subscribers (millions): 20.61 Net Addition in October 2016 (million): 0.03 Monthly growth rate: 17%
3. Rural telephone subscriber (Million): 3.91 Net Addition in October 2016 (million): -0.01 Monthly growth rate: -0.26%
4. Overall tele-density: 1.92 Urban tele density: 5.15 Rural tele density: 45
5. Share of urban subscribers: 84.04% Share of rural subscribers: 15.96%
6. Broadband subscribers (millions): 93

Total (Wireless + Wireline)

1. Total telephone subscriber (million): 1102.94 Net Addition in October 2016 (million): 28.70 Monthly growth rate: 67%
2. Urban telephone subscribers (millions): 642.37 Net Addition in October 2016 (million): 18.00 Monthly growth rate: 88%
3. Rural telephone subscriber (Million): 460.57 Net Addition in October 2016 (million): 10.71 Monthly growth rate: 38%
4. Overall tele-density: 86.25 Urban tele density: 160.50 Rural tele density: 43
5. Share of urban subscribers: 58.24% Share of rural subscribers: 41.76%
6. Broadband subscribers (millions): 42

Policy initiatives

FDI Policy

100% FDI is allowed in telecom sector, in which 49% is allowed through automatic route. This is applicable for basic, unified license, cellular, national/international long distance, commercial V- sat, public mobile radio trunked services, global mobile personal communications services, all types of ISP licenses, resale of international private leased circuits, voice mail/ audiotex/ unified messaging services, mobile number portability services, etc. FDI in telecom sector is subject to observance of licensing and security conditions by license as well as investors as notified by the department of telecommunications from time to time, except other service providers which are allowed 100% FDI on the automatic route.

FDI Inflow

FDI jumped $4.2 billion from $1.61 billion in 2014-16. FDI of $10 billion was received in first  8 months of the financial year 2016-17 which is approximately 2.6 times growth from 2014- 16.

Fiscal incentives

1. Basic customs duty and special additional duty have been
2. The importers of mobile handset components such as chargers, batteries, adopters, and wired headsets need to pay only the countervailing duty of 5%
3. Advantage of 10.5% exists for the local manufacturers of mobile speakers and

Major foreign investments done since April 2014