Foreign direct investment to underpin Indian cloud computing

Will the 100% FDI allowance in the telecoms sector help cloud computing reach Indian companies reliant on mobile connectivity?

Will the 100% foreign direct investment (FDI) allowance in the telecoms sector help cloud computing reach Indian businesses that are heavily reliant on mobile connectivity?

The Telecom Commission (TC) recently approved a 100% FDI allowance – previously 74% – in the telecoms sector.

The 100% FDI allowance will enable new foreign players to set up operations in India without having to partner with Indian investors. It will also allow existing foreign telcos to buy out their Indian partners. 

Despite the political controversy surrounding it, the 100% allowance will see increased investment in communications networks that will support the demand for cloud-based technologies.

According to Arjun Singh, marketing analyst at KPMG Consulting: "The telecoms and IT sectors are inseparably bound, and the growth of one will set off a chain of changes in the other. With 100% FDI allowance in telecoms, IT will see a leap.

“The inflow of funds resulting from the new policy will help telcos to fund investments in coverage enhancements and 3G and broadband wireless access services, which will help in further penetration of telecom services in the country and boost all related sectors, such as information technology.

“Voice communication will become a thing of the past, ushering in the golden era of mobile broadband – the very base for cloud computing.”

By 2014, it is predicted that mobiles will receive and send more data every month than they did in the entire year of 2011, and the number of mobile cloud subscribers will also increase.

FDI increase welcomed by telcos

Telecom companies reacted positively to the increased FDI allowance. A spokesperson at SSTL, a joint venture between Sistema of Russia and Shyam Group of India, supported the move. 

“The much-needed policy decision is certainly a pro industry and a pro consumer move," said a Reliance Communication spokesperson. "The 100% FDI in telecoms will enhance value for all stakeholders.”

The telecoms sector, which was under the pressure of voice service saturation, will now focus on new services driven by information technology.

T Mukherjee, CEO at Meghbela Telecom and Internet, Eastern Zone, said: “As far as the IT sector is concerned, the future shows newer apps and technologies for mobile internet that are content dominated with high attention to services. The impact on the IT sector can be categorized into both new internet application trends and newer internet technologies.”

He said there will be developments in areas such as network video, intelligent search and grid computing.

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