The government's endorsement of increasing the FDI cap to 74% in the capital-intensive telecom sector is an indication of its interest to pave the way for a variety of services in telecom space. However, the earlier sectoral cap of 49% was considered as a major deterrent for foreign investors to hold a majority stake. The flow of FDI is primarily responsible for fund infusion and diversification of product and services.

In the telecom sector, infrastructure cost such as high license fees and the high cost of capital in building networks are a major hindrance. These hindrances are major concerns for the investors to develop their infrastructure. But its absolute size, growth rate, future potential have always lured foreign investors. Its high growth coupled with large potential and favorable regulatory environment are attracting the global telecom majors to grab a share of the telecom pie in India. The telecom majors are looking for options such as mergers, acquisitions, greenfield projects, or participate in telecom IPOs to take hold of profits in the growing sector. Experts feel that the preferred route of entry in this sector will be through acquisitions.

The growth in the telecom industry is dependent on the capacity of the operators to raise the funds required for network expansion. The increasing infrastructure cost and falling price to generate volumes by scale of economies as well as catering to the need of price sensitive customers will remain a challenge for telecom companies. However, the GOI has set new telecom targets of 250 million lines for the industry as part of vision 2007.

To share the views on the Indian telecom industry, The Analyst invited Arpita Pal Agrawal, Infocomm Advisory Services, PwC, India; Rajnish Rastogi, Head, Research, Cris Infac; Pragya Joshi, Markets, Ernst & Young (India); Balaganesh Natarajan, Industry Analyst, Telecom Practice _ Asia Pacific, Frost & Sullivan; Anil Nayar, President Mobility, Bharti Tele-Ventures and Sabyasachi Patra, Consultant, Telecom & Broadband Council, Confederation of Indian Industry.

Endorsement, capital-intensive, telecom sector, fund infusion, diversification, telecom sector, infrastructure cost,high license fees, high cost of capital, building networks, hindrance, concerns, investors, infrastructure,absolute size, growth rate, future potential, foreign investors, favorable regulatory, global telecom, mergers, acquisitions, greenfield projects, telecom industry, network expansion, Balaganesh Natarajan, Industry Analyst, Telecom Practice Asia Pacific, Frost & Sullivan; Anil Nayar, President Mobility, Bharti Tele-Ventures and Sabyasachi Patra, Consultant, Telecom & Broadband Council, Confederation of Indian Industry.