But a recent policy change permitting fixed-line firms to offer mobile services within a limited radius could make the task of luring these investments tough. It hoped the limited mobility service would lure firms with the prospect of being able to operate wireless and landline services and boost telephone penetration. But the cellular industry, which has been the mainstay of private and foreign investment in the telecoms sector, was livid. They feared the cheaper mobile service charging 1.2 rupees for a three-minute call against their tariff of eight rupees, would siphon off customers and hurt revenues. Now, the industry, which had started seeing revived interest after the government unveiled a new telecoms policy in 1999, is again in turmoil and investors are cautious.
Telecom is a highly regulation-driven business.
Investment bankers say many private equity investors, who were looking to invest in Indian telecom ventures, lured by the promise of fast growth in a virgin marketplace, have backed out. Mobility allowed for fixed-line firms is in a limited area today. Regulatory stability is very important for funding telecom projects. The uncertainty has cast a cloud over bidding for the fourth cellular operator licences which the government announced earlier this year. India now has just two private cellular operators in the four main cities and 17 telecom zones with two state-run firms MTNL and BSNL having the option of being the third.