27 Apr 2012

FIPB Rejected Telenor’s Joint Venture Proposal Being Pre Mature

Norwegian telecom major Telenor is looking forward to new telecom partner in India. However, till now Telenor has not disclosed the name of its potential partner(s), directors, key personnel, etc. Even in its application to Foreign Investment Promotion Board (FIPB), Telenor has not disclosed the name of its partners and other crucial details.

As a result the Home Ministry blocked Telenor’s security clearance before FIPB. Further, it is also clear that the Foreign Investment Promotion Board (FIPB) under the FDI Policy of India 2012 is required to consider many factors before any approval is granted in this regard. Telenor application is not satisfying those conditions and criteria.

For instance, while approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. Further, telecom service providers, ISPs and telecom infrastructure providers must comply with licensing and security requirements notified by the Department of Telecommunications for all services in order to make FDI in India.

The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. The majority Directors on the Board of the company shall be Indian citizens. FDI shall be subject to laws of India and not the laws of the foreign country/countries.

The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee.

It seems Telenor failed to satisfy many of these requirements. As a result, its application to establish a new joint venture was rejected by FIPB labeling it as pre mature. FIPB believes that the said proposal is pre-mature as crucial details pertaining to the investee company; specific Telenor entity through which FDI would be routed; details of the Indian partner; the quantum of FDI envisaged, etc are missing. FIPB would not process the application till all missing information and details are provided by Telenor.