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Mahanagar Telephone Nigam Limited is on the lookout for an ally to market its cellular and Internet services and provide technological expertise.

Finance advisor to MTNL S D Saxena has been quoted as saying that a tender should be floated soon to invite proposals from foreign companies.

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The services of the ally will be hired for a fee and there will be no equity sharing with the partner because licence conditions prohibit MTNL from doing so.

The tie-up is necessary because both Internet and cellular services are new areas for MTNL and require special expertise for marketing and network planning.

The existing workforce of the company has experience only in traditional businesses like basic telecom services provision.

The tender for a marketing and technology tie-up for Internet services may be issued within a month.

MTNL has already placed an order worth $345 million for supply of equipment to Cisco Systems and Digital Equipment.

However, the selection of an ally for cellular services may take a few months because MTNL is embroiled in a legal battle with existing private operators in Delhi and Bombay.

Though the Delhi high court division bench is scheduled to deliver a verdict on the legal tangle on February 18, the company is apprehensive that it may be dragged to the Supreme Court.

Private operators in Delhi and Bombay have demanded that their licenses be restructured to bring them on equal footing with MTNL in every sense but the government is banking on the relative weakness of private companies' case to win the battle.

Due to the pending court case, MTNL has still not finalised the $1 billion tender floated in August to obtain equipment for its cellular network.

The pending court case notwithstanding, MTNL officials said that the company would enter the cellular services market only in a non-equity alliance with a foreign partner.

MTNL had originally planned to make a foray into cellular services in a joint venture with a foreign partner.

It, however, had to abandon its plans owing to the protest by its potential competitors in cellular services who argued that awarding licence to a joint venture company would amount to breach of the tender document.

According to their interpretation of the tender document, the government is empowered to delegate the right of operating cellular and basic services to a company only if it is an integral part of the government.

Following this, the government allowed MTNL to enter the cellular services segment, saying it was part of the licence awarded to the company at the time of its inception in 1986.

But, MTNL was prohibited from having an equity alliance with any foreign company.

- Compiled from the Indian media

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