SwissCom and the Ruias had worked out a complex holding structure through which SwissCom would take up its effective stake in Sterling Cellular to 50.04 per cent from 33 per cent. This deal has not come into effect till date.

In fact, doubts are being cast on SwissCom wanting to stay on in the Indian venture at all. This is because, apart from the virtual comatose condition, which the telecom industry currently finds itself in, SwissCom itself, sources say, is not keen on having any incremental exposure in the Indian sub-continent. SwissCom has recently gone public and given its new shareholding profile, return on investments, especially from those in emerging markets, are going to come under greater scrutiny.

Theinvestment climate in India as regards the telecom sector has added to SwissCom's woes. Telecom projects in the country are in trouble owing to the revenue flow not matching the unusually high license fee paid for circles. This has led to most of them failing to pay up their licence dues to the government and are, therefore, now under threat to pay up by February 15 or face action. In the meantime, there is no institutional funding coming in and promoters are finding it impossible to bring in fresh investments, which is severely hampering progress on most projects.

A detailed plan drawn up in mid-1998, envisaging a higher effective stake as well as the handing over of management control to SwissCom has been put on the backburner. "Till this entire muddle is sorted out, there is no way where we are going to make any fresh investment," sources close to SwissCom said.

The Ruias and SwissCom had entered into an agreement whereby the former, while holding 51 per cent in Sterling Computer, could also pledge 38per cent with SwissCom in the operating company. The deal was conditional on the fact that on default, SwissCom could buy out the pledged shares. Had the deal gone through, the Ruias would have been left with only a strategic investment in the cellular telephony business.

SwissCom holds 33 per cent in Sterling Cellular with Sterling Computer at 51 per cent. Non-resident Indians (NRIs) and overseas corporate bodies (OCBs) chip in with 16 per cent.

Under the equity restructuring plan drawn up earlier, Sterling Computer and SwissCom were to hold 48 per cent and 49 per cent respectively in SwissCom Essar (the new name by which Sterling Cellular was to be known).

SwissCom was to get the additional 2.04 per cent thereby enabling it to have an effective stake of 50.04 per cent. Siemens Public Communication Network and a Ruia-controlled concern were to hold 49 per cent and 51 per cent in Sphone Holdings (India) Pvt Ltd. The last mentioned, in turn, was to have a 51 per cent stake in Cellular Holdings India PvtLtd with 49 per cent again being held by SwissCom. Cellular Holdings was to hold a 3 per cent stake in SwissCom Essar. Telecom industry analysts were catergorical that "the stalemate will continue until a new partner is found to replace SwissCom in Sterling Cellular". An alternative, in the form of the Ruias buying out SwissCom's stake in the interim, has been ruled out given the over-extended financial profile of the group.