In a sign that foreign investment can still get tied up in inextricable regulatory knots in India, a potential $390 million investment in the country's telecoms industry fell through after the regulatory authorities failed to approve the transaction after six months of deliberation. Singapore Technologies Telemedia and Telekom Media wanted to buy a 48% interest in Idea Cellular. But India's regulators failed to give the green light. Behind the difficulties lay the fact that, according to Indian rules, the same investor is not permitted to hold more than 10% in competing telephone companies.
Although neither party in the consortium owns shares directly in companies that compete with Idea, Singapore Technologies Telemedia is controlled by Temasek Holdings, which also controls Singapore Telecommunications. Singapore Telecommunications owns 28% of Bharti Tele-ventures, a major competitor to Idea.
The regulators never proclaimed on the bid, but it has now lapsed because of time restrictions. It is not clear whether Singapore Technologies Telemedia and Telekom Malaysia will have the patience to bid again. What is clear is that India has lost out on a significant and much-needed foreign investment.