P6 likely to make a move in India
Foreign funds may lead to
consolidation of ISPs
By Saikat Chatterjee
NEW DELHI: The government decision to allow 100
per cent foreign direct investment (FDI) in ISPs may
trigger a round of consolidation in the Indian ISP sector.
Industry observers predict that B and C category ISPs
and the smaller ones in the A category may be acquired
by global ISPs who want to establish their presence in
India.
``Small and inefficient ISPs will be prime targets for the
foreign ISPs triggering a round of consolidation in this
sector,'' Jasjit Sahwney, CEO of Net4India, a category
A ISP, said.
Earlier the government had set a 49 per cent cap on
foreign equity investment in Indian ISPs. With the
opening up of the sector to 100 per cent FDI, global
ISPs like AOL and PSINet, who were waiting for
liberalisation in this sector, are likely to establish their
presence in India.
Meanwhile, Nasscom has welcomed the government
decision saying that it would give a fillip to Internet
infrastructure. ``This move will inject more money which
is necessary to create a world class Internet infrastructure
in India,'' said Nasscom president Dewang Mehta.
Typically, MNCs with deep pockets would acquire
smaller ISPs who have set up the initial infrastructure in
this area. This would give them some advantage over
starting from scratch.
Larger Indian ISPs like VSNL, Satyam Infoway,
DishnetDSL and Mantra already have a head start in the
market with the early mover advantage.
However, according to industry sources, domestic ISPs
may not be too happy with the government's move. The
sources said domestic majors would rather prefer the
joint venture route.
AOL, the sources said, which was planning to set up
base in India through the joint venture route may now go
it alone by acquiring a smaller ISP which has established
some infrastructure on the ground.
PSINet is also keen to enter India and was waiting for
the government move before establishing its entry in the
country.
Some Japanese ISPs had also shown interest in offering
their services in India.
With new investments in the Internet sector the country is
poised to witness higher activity. This may also infuse
funds into the broadband sector in a country where
Internet bandwidth is scarce.
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