Foreign direct investment in the Indian telecommunications sector

of these companies have since exited the market including AT&T, British Telephone, France
Telecom, Swisscom (Switzerland), and Telstra (Australia).²⁷ Presently, there are six major
foreign telecommunications companies in the country and they are all from the Asia-Pacific
region (Singapore, Hong Kong, and Malaysia).²⁸

There are six large telecommunications companies that have a nationwide presence in
India and several smaller companies that focus on specific regions. One of the six large
companies is a state-owned enterprise with a large fixed line network. The Telecom Regulatory
Authority of India (TRAI) projects foreign and domestic investment of $12 billion over the next
two years in Indian telecommunications networks. It is anticipated that most of the new
investment will be raised from financial institutions and public offerings.²⁹

Currently a small proportion of customers provide the largest shares of revenue.³⁰ Costs
are projected to decline in both long-distance and mobile telephony along with an attendant
reduction in revenues.

The telecommunications sector has received some useful tax incentives during the
implementation of the New Telecom Policies. These incentives include amortization of
telecommunications license fees, tax exemptions on venture capital finance and loans and
favorable importation of some equipment at lower customs duty rates. Additionally, there are
some exemptions from capital gains taxes.³¹

²⁷ Economist Intelligence Unit, “Foreigners Welcome.”, Business India Intelligence, February 9, 2005

²⁸ Economist Intelligence Unit, “Foreigners Welcome.”, Business India Intelligence, February 9, 2005

²⁹ Economist Intelligence Unit, “India Telecoms: A brave new world.”, Business India Intelligence-Main Report
March 24, 2004

³⁰ Indian Department of Telecommunications - http://www.dotindia.com/plans/planindex.htm

³¹ Report of the Committee on Compilation of Foreign Direct Investment in India.

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