ZTE expansion put on hold

Category: Government | 1 Comment | Posted on June 5, 2006

ET reports that the government has put on hold Chinese giant ZTE Telecom’s plan to enter wholesale trading in telecom equipment, following objections from intelligence agencies.

The home ministry is now conducting a detailed probe into the Chinese company’s activities and the Foreign Investment Promotion Board (FIPB) has been told that ZTE can’t be granted permission for wholesale trading before the investigation report is considered.

Already in the Indian market with a subsidiary, the Chinese company had sought permission to enhance its equity capital and enter after-sales service and wholesale trading of telecom equipment.

Security agencies have also picked up the issue of lack of adequate ‘subscriber verification’ by telecom companies. They have also opposed ‘remote access’ to telecom networks which telecom companies consider necessary since many of the equipment suppliers are foreign companies.

These issues are likely to be discussed when the Union Cabinet takes up review of FDI guidelines for telecom companies following the recent decision to enhance foreign investment ceiling in telecom to 74%, compared to the earlier level of 49%.

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