The invitation follows the imbroglio on the equity issue partly as a result of the National Telecom Policy which restricts foreign equity holding in the sector to 49 per cent and partly owing to the inability of WorldTel and Elcot to find a third partner to share equity in the project as per the original understanding.

The ICAC project -- a joint venture between Elcot, the nodal agency for coordinating the project, and WorldTel of the UK -- has a total capital outlay of Rs 352 crore of which equity capital is Rs 176 crore, to be shared between WorldTel (49 per cent), Elcot (26 per cent) and the balance 25 per cent to be picked up by a third partner yet to be identified.

The TN government suggested that a private promoter from Tamil Naducould be identified, if necessary, to pick up the balance 25 per cent but WorldTel, according to sources, wanted to rope in a partner at the national level since the company had proposed many such internet projects to several other states in the country.

The fall of the Vajpayee-led coalition government at the Centre threw a spanner in the works of WorldTel to find a third partner immediately. To get over the ticklish problem of equity holding, the TN government then suggested that WorldTel itself pick up the balance 25 per cent and after a two-year holding period disinvest the same to a third partner.

WorldTel, it is learnt, has approached the Foreign Investment Promotion Board (FIPB) to allow it to hold the balance 25 per cent thereby taking its stake to 74 per cent in the project.

Meanwhile, WorldTel has informed the TN government that it proposes to set a up a wholly-owned subsidiary in the country. But this is being done through a complex process.

WorldTel UK Ltd is a 100 per cent subsidiary ofWorldTel Holdings Ltd incorporated in Bermuda. WorldTel UK has set up WorldTel Mauritius Ltd as its 100 per cent subsidiary. It is through this Mauritius operation that WorldTel proposes to set up WorldTel India Ltd which will invest 74 per cent stake in the project through a separate company to be incorporated in Tamil Nadu, possibly to be called WorldTel Tamil Nadu Ltd.

Another hitch that faced the promoters of ICAC was the signing of the joint venture agreement especially on legal issues regarding disinvestment process. While the TN government was seeking to apply the time-tested formula on this sensitive issue of disinvestment as per standard guidelines, WorldTel had, through its legal experts, suggested some changes in the draft agreement. After consultations with its legal and finance departments, the TN government has sent a final draft on the joint venture agreement to WorldTel UK for its acceptance.

It is learnt that WorldTel has agreed to this draft and the TN government has called for a meetingnext week for signing the formal joint venture agreement between Elcot and WorldTel.