FDI IN SATELLITE BASED INTERNET SERVICE PROVIDER - MMJC

Recently, the Government has opened up the Telecom Sector for Foreign Direct Investment (FDI) under 100% Automatic route. Internet services can be provided by Internet Service providers (through cables) or satellites.

Whether satellite-based internet service providers are covered under telecom sector which is allowed to bring in 100% FDI? We will discuss this at length.

Sectors under FDI

Providing internet services through satellite falls under the following two sectors of the NDI Rules[1]:

• Satellites- Establishment and Operation (“Satellite Sector”)
• Telecom Services (“Telecom Sector”)

The Satellite Sector falls under the 100% Approval route which means that any entity engaged in this sector cannot receive FDI without prior Government approval whereas the Telecom Sector as stated above has been relaxed to receive upto 100% FDI under the Automatic Route.

If an entity is providing Satellite-based internet service, then it will fall under both sectors and by applying the rule of harmonious construction which states that the stricter provisions will prevail, we can say that such entity will require prior Government approval to receive FDI.

Further, where an entity is providing non-satellite-based internet services i.e through cables, then such entity will fall under the Telecom Sector and will therefore be allowed to bring in 100% FDI under the automatic route.

Downstream Investment

Also, if the holding company has received FDI and intends to form a subsidiary engaged in the satellite sector, then such entity would require prior Government approval as this will be treated as Indirect Foreign Investment.

Way Forward

There has been recent news where our Hon’able Prime Minister held a virtual meet for the launch of the Indian Space Association (ISpA). It is anticipated that the spacecom sector will gain great momentum in the coming times.

Let’s see where this heads. We will keep our readers posted on the same.

[1] Foreign Exchange Management (Non-debt Instruments) Rules, 2019,