Indian telecom industry on a growth trajectory

India’s telecommunication sector has registered phenomenal growth during the past few years. India now has the world’s second largest telecom network and is one of the most lucrative telecom markets globally. Government policies and the regulatory framework have provided a conducive environment for service providers. Growth is expected to continue, with penetration in rural areas being a major area of opportunity for the next five years.

The main growth drivers in the sector are: (i) subscriber base, which is expected to rise from 51% currently to 72% by 2016; (ii) mobile value-added service, which is forecast to grow to US$10.8 billion by 2015 especially from semi-urban and rural areas; (iii) mobile number portability; (iv) handsets, with shipment of 208.4 million expected by 2016; (v) new network architectures to deliver high-bandwidth services.

Investment climate

Earlier foreign direct investment (FDI) policy allowed 74% FDI (automatic up to 49% and with government approval for 49%-74%) in specified telecom services. However, in a bid to attract more investment from telecom giants, India has increased the permitted FDI to 100% (automatic up to 49%, government route above 49%) for all telecom services.

OP Khaitan & Co is a 40-lawyer law firm, based in New Delhi. Gautam Khaitan is the firm’s managing partner and Nidhi Mathur is a junior partner.