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FIs chary of 4th cellular player

Baburajan K

Financial institutions, which had earlier shown apprehension in financing cellular firms due to the limited mobility issue, have now decided to part-fund their fourth cellular ventures.

However, institutions will be choosy in identifying companies and offering funds. This means that all the existing players will not get easy access for institutional funds. Disbursement of funds to cellular firms will mainly depend on the viability of circles and credibility of promoters, FI officials said.

"We will be selective in funding cellular firms' expansion plans. We think the domestic mobile market is growing well, and basic operators with limited mobility may not be viable due to change in the revenue-sharing structure. Hence, many cellular firms, which had bid for basic licences, may not go ahead with their earlier plans," an institutional source said.

"Entering into a circle as a fourth operator is an opportunity for an existing player, but at the same time the company will have to face competition from the other two to three companies. Funding our existing customers will help us get good return by achieving economies of scale," the source added.

Also, licence fee this time could be lower than in the first round of bidding in 1995. The cost for implementation of telecom infrastructure could also be comparatively less due to the dwindling prices of telecom equipment. "Our customers have learnt to chalk out plans in crisis," the source added.

The institutions will not offer funds to some telecom companies due to their earlier track record. However, institutional sources declined to name these firms.

Companies such as Birla-Tata-AT&T, Bharti, Spice, BPL, Hutchison and Reliance are in the race to add more circles by bidding for fourth cellular licences.

Institutions such as the Industrial Development Bank of India was planning to invest around Rs 10 billion last year. Due to the government policy on limited mobility, many cellular firms had earlier put their expansion plans on hold.

But the recent changes in the revenue-sharing ratio for basic operators, who opt for limited mobility services, have prompted cellular companies to take a re-look at their investment plans. This has also forced institutions to offer more funds to cellular companies.

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