INDIA'S PRIVATIZED TELECOM INDUSTRY IS LOSING HOPE \ MARKET HASN'T YIELDED ANTICIPATED REVENUE

INDIA'S PRIVATIZED TELECOM INDUSTRY IS LOSING HOPE \ MARKET HASN'T YIELDED ANTICIPATED REVENUE

Four years ago, when the Indian government unveiled its blueprint for telecommunications privatization, companies rushed in full of confidence, banking on the potential of a huge market.

Much of that market is still a mirage, and there is a sense of despair instead.''The (private telecommunications) industry is losing hope,'' Sunil Mittal, chairman of the Association of Basic Telephone Operators, told a convention organized by the Confederation of Indian Industry here Friday. ''Many companies want to quit.''

The 1994 policy set the goal of achieving a world-class telecommunications infrastructure for India. While private cellular and paging services are operational in large parts of India, basic telephone services have yet to take off.

As Justice S.S. Sodhi, chairman of the Telecommunications Regulatory Authority of India (TRAI), bluntly put it, ''Some yards have been covered, but India still has miles to go.''

Mr. Sodhi said everyone must ponder what has gone wrong with India's promised telecommunications revolution. ''If investors begin to face losses, the entire liberalization process will be in jeopardy,'' he warned. Some rulings by the TRAI have not gone down well with the Department of Telecommunications, which has asked the Delhi High Court to clarify issues relating to jurisdiction. The department's antagonistic position toward the authority, in turn, is prompting concern from foreign investors.

''There is need for regulatory stability for companies to bring in the right technology in a competitive environment,'' said William M. Clossey, vice president for international public affairs at AT&T, the largest investor yet in the Indian telecommunications sector.

Analysts say the reasons for the dismal state of the industry are known.

When the government announced it was opening the state-owned industry to domestic and foreign investment, companies used the deceptive 200 million Indian middle-class as their customer base. They bid huge license fees based on that number.

But the market has not produced the revenue that everyone anticipated, and the license fees have become a millstone around companies' necks.

Industry sources estimate the paging industry is losing 200 million rupees ($5 million) every day, mainly because the government allowed too many players. According to Mr. Sodhi, the telecommunications policy was conceived in haste. Instead of going for a revenue-sharing arrangement with private companies, the government made the mistake of auctioning the licenses, hoping to enrich the state's coffers.

Now, private companies are saying they are not making enough money to pay the license fees.