Swisscom made the announcement of its withdrawal from Malaysia and India in Berne, Switzerland, on Friday while releasing its 1998 financial results. Swisscom holds 32.5 per cent equity stake in Sterling Cellular, the joint venture with Essar group. In Aircel Digilink, Swisscom has an equity holding of 10 per cent directly while Sterling Cellular holds 80 per cent equity stake.

A top Essar official said the withdrawal of Swisscom will not affect Sterling Cellular and Aircel's cellphone services in Delhi, Rajasthan, east Uttar Pradesh and Haryana.

A press release issued by Essar stated, "Essar and Swisscom have worked out a mutually acceptable transition process and will continue to work together to provide continued and uninterrupted service to its valued customers and stakeholders."

The Essar official said his company waslooking at various options including tie-up with a new strategic partner. "It will take some time to work out the modalities of withdrawal by Swisscom and the pricing of shares held by Swisscom. Essar has the first right to buy out Swisscom's shares," he said. Essar officials said they were prepared for the news of Swisscom's withdrawal from India.

Sources said Swisscom's decision was prompted by "non-conducive" business environment including the existing policy structure. Foreign partners in the private telecom ventures have been pressing the Government for change in the existing telecom policy. The private sector wants the Government to do away with the licence fee structure and replace it with a revenue-sharing system. The Government's decision to stick to the licence fee structure could see more foreign partners walking out of India, industry sources said.

Essar sources said that the telecom reform process had reached a standstill due to the harsh steps taken by the ministry of communications in therecent past.

"Not only have operators been forced to pay up, the Government has also undermined the independence of the regulator," sources added. Essar said that it was matter of regret that the current policy environment was being convoluted and expressed hope that something would still be done to prevent the flight of foreign capital.