The Foreign Investment Promotion Board (FIPB) on Monday approved a proposal by British telecom major Vodafone Group Plc to take full control of its Indian operations in a $1.6-billion share purchase, economic affairs secretary Arvind Mayaram said.
The deal needs final approval from the union cabinet to become operational.
India allows foreign companies in the telecommunications sector to hold up to 100 per cent in their Indian operations.
Vodafone, which entered India in 2007 by buying Hutchison Whampoa's local cellular assets in an $11.1-billion deal, directly and indirectly owns a combined 84.5 per cent of Vodafone India, the country's No2 telecom company by users and revenue. Its direct holding in the unit is 64.4 per cent (See: Vodafone pays $10.9 billion to complete Hutch deal).
In 2011, the company raised its stake in the Indian entity to 74 per cent.
Vodafone Plc, which had been under a long-drawn tax dispute with the government for not paying tax on its acquisition of the 67 per cent stake in Hutch-Essar, obtained a Supreme Court ruling in its favour in 2012 (See: SC rejects government's review petition in Vodafone tax case), following which, the then finance ministry headed by Pranab Mukherjee brought about retrospective amendments allowing it to tax Vodafone-type deals.
In 2013, the union cabinet approved a conciliation with Vodafone, following which the company sought approval to raise stake in Indian entity to 100 per cent as per the FDI norms (See: Vodafone seeks nod to wholly own its Indian unit).
The FIPB approval has come before the forthcoming auction of spectrum, giving the company some leeway in taking investment decisions.
The FIPB, however, deferred a decision on the proposal of HDFC Bank to increase the foreign institutional investor holding limit.