Industry analysts said the government's decision amounted to introducing competition through the back door and violated the licence conditions of the cellular industry. Telecoms is a highly regulation-driven business. You can get the world's smartest guys doing your marketing but you can't make a 100th of the money which you can otherwise make by just one change in a rule. Investment bankers said many private equity investors, who were looking to invest in Indian telecoms ventures, lured by the promise of fast growth in a virgin market place, had backed out. Mobility allowed for fixed-line firms is in a limited area today.
Regulatory stability is very important for funding telecoms projects.
The uncertainty has cast a cloud over bidding for the fourth cellular operator licence which the government announced earlier this year. India has just two private cellular operators in the four main cities and 17 telecoms zones with two state-run firms, MTNL and BSNL, having the option of being the third.