The Group of Ministers on Telecom on Thursday approved a hike in foreign investment limit in the sector to 74 per cent from the present 49 per cent, subject to the management control remaining in Indian hands.

"The foreign direct investment (FDI) limit will be 49 per cent, but foreign institutional investor (FII) investment will not be a part of this limit. So the total foreign investment cap will be 74 per cent," Communications and IT Minister Arun Shourie told reporters after the first meeting of the GoM, chaired by Finance Minister Jaswant Singh.

Intra-circle mergers allowed

In another major decision, the GoM also allowed intra-circle mergers in the sector, but with the condition that the number of service providers will not fall below three in any circle and that rural telephony obligations will get transferred to the new owner.

Another condition for the merger would be that the new owner would get spectrum only as per the user base.

On achieving rural telephony targets, the GoM has decided to take a view on whether the current ceiling of 5 per cent of revenue share going towards Universal Service Obligation Fund be increased.

"The officers of the ministry of finance and the department of telecom will work out a joint note in this regard and also to operationalise the USO Fund. Besides this, the note will highlight the need to extend the concessions to state-owned BSNL for rural telephony for the entire 10th Five-Year plan," Shourie said.

All the recommendations of the GoM including that on FDI would be taken to the Cabinet for approval.

Govt may shelve Convergence Bill

The much-hyped Convergence Bill putting in place a super-regulator for telecom, IT and broadcasting sectors is likely to be put on the backburner with the GoM deciding not to proceed with the proposed legislation.

"At this point, it cannot be pursued further. We will report it to the Cabinet," Shourie said.

Sources said it was felt that the Convergence Bill was premature, and there were fears that the proposed super-regulator Communications Commission of India could become too powerful.

There was also a view that while convergence of carriage was possible the same is not true for content.

The GoM also took note of alleged violation of license condition by Reliance in offering wireless in local loop (mobile) services, a move that could have significant implications for the company.

"We discussed the report by Telecom Engineering Consultants about Reliance violating the 'limitedness' of WLL services and going against the spirit of license and GoT-IT's recommendations," Shourie said.

Shourie, however said the Group was yet to take a final view on how to enforce the limitedness in the WLL services.

On the other contentious issue of proposed unification of basic and cellular licenses, Shourie said the GoM agreed in-principle to proceed with it and the government has requested Telecom Regulatory Authority of India to make a detailed presentation on the subject in its next meeting slated for October 4.

The Group has also asked Deepak Parekh, chairman of HDFC to make a presentation on the transition path to unified license regime including issues such as spectrum charges and fee.