Indian Government Investigates Russian Investment in Shyam Telelink

India's Finance Ministry has issued a "show clause" notice on Shyam Telelink after Russia's Sistema recently increased its holding in the company to 73.97% without seeking government approval. The government has a mandatory cap of 75% for foreign ownership, but has to approve any investments above 49%, as Vodafone found when it took control of Vodafone Essar.

The Foreign Investment Promotion Board (FIPB) has approved Sistema to take a 51% stake in the company - but there seems confusion about any further hike. The company itself says that it has approval to raise the foreign investment to 74%.

Sistema guaranteed US$520 million of the total US$630 million that was paid for obtaining CDMA licenses covering the whole country.

In the letter sent to the firm, the Finance Ministry noted that "in this regard, it is further stated as per extant FDI policy in telecom sector, FDI beyond 49% to 74% is allowed with prior approval of the FIPB. Therefore, you are requested to clarify how the company has increased the foreign equity up to 74%, without approval of FIPB,"

Shyam Telelink recently secured sufficient radio spectrum to launch a national CDMA network, while Alcatel-Lucent and Chinese pair Huawei Technologies Co. and ZTE Corp were named as the suppliers for the new network.

Posted to the site on 5th September 2008