Telecom: 5G Licensing & Infrastructure

India's Telecom Sector: The Investment Opportunity

India is the world's second-largest telecom market with over 1.17 billion mobile subscribers and approximately 394 million 5G subscriptions as of late 2025 — representing 32% of total mobile subscriptions. The sector has attracted cumulative FDI of approximately USD 40 billion (INR 3,43,360 crore) between April 2000 and March 2025, making it one of the top five FDI-receiving sectors in India.

The investment case is driven by several converging factors:

• 5G rollout acceleration: India deployed over 521,000 5G base stations by January 2026, achieving 85% population coverage. The 5G infrastructure market is projected to grow from USD 14 billion in 2025 to USD 574 billion by 2035 at a 45% CAGR
• Policy liberalisation: 100% FDI is permitted under the automatic route since October 2021, eliminating the previous 49% automatic route cap
• Regulatory modernisation: The Telecommunications Act 2023 replaces the 138-year-old Indian Telegraph Act, streamlining licensing and spectrum management
• Government investment targets: The draft National Telecom Policy 2025 targets INR 1,00,000 crore (USD 11.67 billion) in annual sector investment by 2030, with goals of 100% 4G coverage and 90% 5G population coverage

This guide covers everything a foreign company needs to know about entering India's telecom sector — from FDI policy and licensing to infrastructure investment and compliance.

FDI Policy Framework for Telecom

India permits 100% FDI in the telecom sector under the automatic route. This means no prior government approval is required — the foreign company simply incorporates an Indian entity (typically a private limited company), makes the investment, and files the required post-investment reports with the RBI.

Key FDI Rules

Press Note 3 Implications for Telecom

The telecom sector is strategically sensitive, and Press Note 3 restrictions are strictly enforced. Any FDI from China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, or Afghanistan — including indirect beneficial ownership — requires prior government approval through the DPIIT's Foreign Investment Facilitation Portal (FIFP). Given India's security concerns in telecom, Chinese equipment manufacturers and investors face additional scrutiny. India effectively banned telecom equipment from Chinese vendors (Huawei and ZTE) for 5G networks through the Trusted Telecom Portal mechanism, requiring security certification for all network equipment.

Historical FDI Policy Evolution

Understanding the policy trajectory provides context for the current liberal regime:

• 2005: FDI cap raised from 49% to 74% with government approval beyond 49%
• 2013: 100% FDI permitted, but beyond 49% required government approval
• September 2021: Cabinet approved 100% FDI under automatic route for all telecom services
• October 2021: Notified in the FDI policy, effective immediately

This progression from 49% automatic to 100% automatic reflects the government's recognition that foreign capital is essential for the massive infrastructure investment required for 5G and beyond.

Telecommunications Act 2023: The New Regulatory Framework

The Telecommunications Act 2023 (Act No. 44 of 2023), which received Presidential assent on December 24, 2023, replaces the Indian Telegraph Act 1885 and the Indian Wireless Telegraphy Act 1933. Key provisions relevant to foreign investors include:

Shift from Licensing to Authorisation

The Act replaces the previous licensing regime with an "authorisation" framework. Every entity providing telecom services, operating a telecom network, or possessing radio equipment must obtain an authorisation from the Central Government. The Telecommunications (Authorisation for Provision of Main Telecommunication Services) Rules, 2025, operationalise this framework.

Spectrum Management Reform

The Act provides a modernised legal framework for spectrum management:

• Assignment methods: Spectrum can be assigned through auction, administrative allocation, or other prescribed methods
• Secondary assignment: Licensees can share, trade, lease, and surrender spectrum — creating a secondary market that did not exist before
• Technology neutrality: Spectrum can be used for any technology, enabling operators to repurpose spectrum from older technologies (2G/3G) to 5G
• Satellite spectrum: Administrative assignment for satellite broadband, avoiding the auction requirement — significant for players like Starlink and OneWeb entering India

Consumer Protection

New provisions mandate transparent billing, data privacy compliance, and quality of service standards — areas where foreign entrants must ensure compliance from day one.

Licensing Framework: Unified License and Authorisations

To operate telecom services in India, a foreign-invested company must obtain the appropriate licence or authorisation from the Department of Telecommunications (DoT).

Unified License (UL) Categories

The Unified License is the primary licensing framework, with multiple authorisation categories:

Application Process

The application process is conducted online through the SARAL SANCHAR portal (saralsanchar.gov.in):

1. Registration: Register the company on the SARAL SANCHAR portal with company details, director information, and digital signature certificates
2. Application submission: Submit the application for the desired authorisation category with supporting documents
3. Document verification: DoT verifies company registration, FDI compliance, net worth certificates, and security-related documentation
4. Security clearance: For access services and certain categories, security clearance from the Ministry of Home Affairs (MHA) is required. This can take 3-6 months
5. License issuance: Upon approval, the licence is issued with standard terms and conditions including compliance obligations

Critical Requirement: Indian Company Only

The applicant must be a company registered under the Companies Act, 2013. A foreign company cannot directly hold a telecom licence in India. The foreign investor must establish an Indian subsidiary — typically a private limited company or public limited company — which then applies for the licence. This is a non-negotiable structural requirement.

5G Spectrum Allocation and Opportunities

India's 5G Spectrum Auctions

India conducted its landmark 5G spectrum auction in August 2022, with total bids of INR 1,50,173 crore (approximately USD 18 billion):

A subsequent auction in 2023-24 sold 141.4 MHz of spectrum worth INR 11,340 crore, primarily for non-5G band renewals.

Private 5G Networks

India's spectrum policy allows enterprises to obtain spectrum directly for private 5G networks — a significant opportunity for foreign companies operating factories, ports, logistics hubs, or campuses in India. Private networks can be deployed using:

• Spectrum leased from licensed telecom operators
• Spectrum in designated bands (e.g., 26 GHz mmWave) for enterprise use
• CBRS-style shared spectrum models being explored by TRAI

Infrastructure Investment Opportunities

Foreign investors can participate in India's telecom infrastructure build-out through several avenues:

Tower Companies (Infrastructure Provider IP-I)

India has approximately 730,000 telecom towers — the second largest tower inventory globally after China. The major tower companies include:

• Indus Towers: Approximately 249,000 towers, focusing on 5G network densification and international expansion
• Altius (formerly Brookfield/Summit Digitel): Approximately 257,000 towers
• ATC India (American Tower Corporation): Approximately 76,000 towers

Foreign investment in tower companies requires an IP-I registration, which has a lower entry barrier than full telecom licences. Tower companies earn rental income from operators on a per-tenancy basis, with typical lease terms of 10-15 years.

Fibre Networks

Only 36% of India's towers are currently fiberised, compared to 65-70% in South Korea and 80-90% in the US, Japan, and China. The government's BharatNet programme aims to connect 250,000 gram panchayats with optical fibre. Foreign companies can participate through:

• Building and operating fibre-to-the-tower networks
• Providing last-mile fibre connectivity in urban areas
• Public-private partnerships under BharatNet Phase III

Data Centres

India's data centre capacity is expanding rapidly, driven by 5G, cloud adoption, and data localisation requirements. Foreign data centre operators like Equinix, NTT, ST Telemedia, and EdgeConneX have significant India operations. Data centres benefit from:

• 100% FDI under automatic route
• Infrastructure status granting access to cheaper financing
• SEZ/STPI benefits for IT-related data centres
• Multiple state government incentive schemes offering land, power, and tax concessions

Telecom Equipment Manufacturing

The government's PLI (Production Linked Incentive) scheme for telecom and networking equipment offers incentives of 4-7% of incremental sales over 5 years. Foreign equipment manufacturers can access:

• PLI incentives for manufacturing in India
• Trusted Telecom Portal certification for equipment supply to Indian operators
• Preferential Market Access (PMA) policy favouring domestically manufactured equipment for government procurement

Compliance Framework for Foreign Telecom Investors

DoT Compliance

• License fee: 8% of Adjusted Gross Revenue (AGR) — this has been a contentious issue, with the definition of AGR settled by the Supreme Court in 2019 to include non-telecom revenue
• Spectrum Usage Charges (SUC): 3-8% of AGR depending on the spectrum band and operator
• Annual reporting: Quarterly and annual financial reporting to DoT, TRAI
• Quality of service: Compliance with TRAI's Quality of Service regulations including call drop rates, network availability, and customer grievance resolution

Security Compliance

The telecom sector has stringent security requirements:

• Lawful interception: All telecom operators must provide lawful interception capability to authorised agencies
• Data storage: Call data records (CDRs) and other subscriber data must be stored in India
• Network security: Compliance with the Trusted Telecom Portal requirements for all network equipment
• Security audit: Annual security audits by CERT-In empanelled auditors
• Key management personnel: Security-sensitive positions must be held by Indian nationals — this is a non-negotiable licence condition

FEMA and RBI Compliance

Standard FEMA compliance for foreign-owned companies applies:

• FC-GPR filing for equity investments
• FLA return filing by July 15 annually
• Pricing compliance for any share transfers
• Transfer pricing documentation for intercompany transactions (equipment supply, technology licensing, management fees)

Companies Act and Annual Compliance

The Indian subsidiary must comply with all standard Companies Act requirements including:

• Statutory audit by an Indian CA firm
• Annual ROC filings (AOC-4, MGT-7)
• Board meeting compliance (minimum 4 per year)
• Resident director requirement
• GST registration and monthly/quarterly returns

Entry Strategy Options for Foreign Telecom Companies

Option 1: Full Operator (Access Service Licence)

For companies seeking to offer mobile or fixed-line services directly. This requires massive capital investment (INR 2,500 crore+ net worth for pan-India), security clearance, and spectrum acquisition. Realistic only for large global operators — and even then, the Indian market's competitive dynamics (three private operators plus BSNL) make new entrant viability challenging.

Option 2: Infrastructure Provider

Lower entry barriers, recurring revenue model, and growing demand from 5G densification. Tower companies, fibre operators, and small cell providers operate under IP-I registration. American Tower's India business demonstrates the model's viability — generating over USD 1 billion in annual revenue from tower leasing.

Option 3: Equipment and Technology Supplier

Supply telecom equipment, software, or technology to Indian operators without holding a telecom licence. This requires Trusted Telecom Portal certification for core network equipment. Nokia, Ericsson, and Samsung are the primary 5G equipment suppliers to Indian operators following the effective exclusion of Chinese vendors.

Option 4: Enterprise/Private Network Provider

Provide private 5G network solutions for enterprises — factories, ports, airports, campuses. This is an emerging opportunity where global experience is valued. Partners with licensed operators for spectrum access.

Option 5: Strategic Investment in Existing Operators

Acquire stakes in existing telecom companies or infrastructure providers. Recent examples include Google's investment in Jio Platforms (USD 4.5 billion), and Brookfield's acquisition of Reliance Jio's tower assets to create Summit Digitel (now Altius).

Competitive Landscape: Understanding the Market Before Entry

India's telecom market is a consolidated oligopoly dominated by three private operators and one state-owned player. Understanding this landscape is essential before committing investment.

Major Operators

Average Revenue Per User (ARPU)

India has one of the lowest ARPUs globally, though tariff hikes in 2024-2025 have improved the trend. Jio's ARPU reached approximately INR 203 per month in Q3 FY2025-26, while Airtel's ARPU stood at approximately INR 245. These figures remain a fraction of developed-market ARPUs (USD 40-60/month), but the sheer subscriber volume — combined with rising data consumption averaging 25+ GB per user per month — creates scale economics that reward infrastructure investment.

Key Competitive Dynamics

• Price competition: Jio's 2016 entry disrupted the market with free services, triggering consolidation from 12+ operators to effectively three. While tariff discipline has improved, price wars remain a risk for new entrants
• Data consumption growth: India's average monthly data consumption per user exceeds 25 GB — among the highest globally — driven by affordable data plans and smartphone penetration. This consumption drives the need for network investment and infrastructure
• Enterprise opportunity: The enterprise segment (B2B connectivity, managed services, IoT, private 5G) is underpenetrated compared to consumer services and represents a growing revenue opportunity for foreign technology companies

Tax Incentives and Government Support

Several government programmes support telecom investment:

Production Linked Incentive (PLI) Scheme

The PLI scheme for telecom and networking equipment, with an outlay of INR 12,195 crore, offers 4-7% incentive on incremental sales for 5 years. Eligible products include core transmission equipment, 4G/5G radio access network equipment, IoT/M2M devices, enterprise equipment (routers, switches), and customer premise equipment.

BharatNet Programme

The government's INR 19,041 crore BharatNet Phase III aims to extend fibre connectivity to all 6,00,000+ villages via public-private partnerships. Foreign fibre and infrastructure companies can participate as implementation partners.

Digital India Programme

Broader government initiatives around digital governance, smart cities, and digital financial inclusion create demand for telecom infrastructure and services that foreign companies can serve.

State-Level Incentives

Several Indian states offer specific incentives for telecom infrastructure investment:

• Tamil Nadu: IT/ITES/Data Centre policy offering capital subsidies and stamp duty exemptions
• Maharashtra: Policy incentives for data centres including electricity duty exemptions
• Uttar Pradesh: Subsidies for tower deployment in underserved areas
• Telangana: Single-window clearance for telecom infrastructure with timeline guarantees

Risk Factors for Foreign Investors

Foreign companies should be aware of sector-specific risks:

• AGR disputes: The Supreme Court's 2019 ruling on the expanded definition of Adjusted Gross Revenue created massive liabilities for operators. While the government offered relief through a 4-year moratorium on AGR dues, the expanded AGR definition remains in force and affects ongoing licence fee calculations
• Tariff regulation risk: TRAI has the authority to regulate tariffs, though it generally follows a forbearance approach. Floor price regulation has been discussed but not implemented — any such regulation could affect operator economics and, by extension, infrastructure demand
• Spectrum payment burden: Large upfront spectrum acquisition costs strain operator balance sheets. The government introduced 20-year payment terms with annual instalments, but the cumulative spectrum liability remains significant
• Right of way challenges: Deploying fibre and towers faces practical challenges including right-of-way permissions from municipal authorities, which can be slow and unpredictable despite the Indian Telegraph Right of Way Rules, 2016
• Currency risk: Revenue is denominated in INR while much of the equipment and technology procurement is in USD/EUR. Exchange rate fluctuations directly affect returns for foreign investors

Cost Considerations

Key Takeaways

• 100% FDI automatic route: Foreign companies can invest up to 100% in Indian telecom without prior government approval, but must comply with DoT security conditions and establish an Indian company to hold the licence
• Telecommunications Act 2023 modernises the framework: The shift from licensing to authorisation, technology-neutral spectrum use, and secondary spectrum trading create new opportunities for foreign investors
• Infrastructure is the high-opportunity entry point: Tower companies, fibre networks, data centres, and small cell providers face lower entry barriers than full operators and benefit from India's massive 5G densification requirement
• Security compliance is non-negotiable: Lawful interception capability, Indian data storage, Trusted Telecom Portal certification for equipment, and Indian nationals in security-sensitive roles are mandatory conditions
• Press Note 3 strictly enforced: Chinese and land-border country investors face mandatory government approval, and Chinese telecom equipment is effectively excluded from 5G networks through the Trusted Telecom Portal mechanism

For guidance on structuring your telecom sector investment in India — from entity setup and FDI compliance to licensing and regulatory filings — explore our FDI advisory services and foreign subsidiary registration.