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Vodafone for 100 per cent FDI in Indian telecom sector

Erik De Rijk, Managing Director Vodafone International Holdings BV says the sectoral FDI cap of 74 per cent in the Indian telecom sector necessarily forces all foreign companies to operate as joint ventures.

Vodafone, which had a rough patch with its Indian partner Essar, on Tuesday pitched for India allowing 100 per cent FDI in telecom.

Responding to a discussion paper of the Department of Industrial Policy and Promotion (DIPP) Erik De Rijk, Managing Director Vodafone International Holdings BV, said the sectoral FDI cap of 74 per cent in the Indian telecom sector "necessarily forces all foreign companies to operate as joint ventures".

Vodafone pays $400 mn more for Essar deal

Pointing to not-so-pleasant ties between several JVs, he said "the track-record of joint ventures (JVs) have been well researched, and the problems of longevity and conflicting objectives arising between partners over time are well documented".

He said forcing the foreign companies enter into a JV with a local partners puts the former into a disadvantage.

"This creates competitive dis-advantages for such JVs - for example Indian competitors in the telecom sector can be wholly owned and therefore enjoy the privilege of greater strategic clarity and flexibility as opposed to the JVs between the foreign and Indian enterprises," he said.

DO SEE: Vodafone's ownership troubles

Vodafone, which had a JV with the Essar Group saw a souring phase over valuations. The Ruias' owned Essar Group has since exited.

FDI upto 74 per cent in the Indian telecom sector and the Indian holdings in the Vodafone joint venture are presently well disbursed.

The DIPP had put out a discussion paper on relevance of FDI caps in different sectors.

Vodafone, headquartered in the UK is India's second biggest telecom operator. The company has operations in 30 countries.