The Union telecommunications ministry has sent a letter to the Telecom Regulatory Authority of India to remove the cap on the number of mobile players in a single cellular circle from the present four.
"We have sent a letter to the telecom market regulator recently. The cap on the number of cellular players in a circle should go and that could open up the market for further competition," Pramod Mahajan, minister for parliamentary affairs, telecom and IT, said at the launch of Reliance Infocomm's limited mobility service on Friday.
This means that cellular companies, which have already recorded mounting losses, could face more financial pressure.
At present, all circles have four cellular operators including a state-run company like Mahanagar Telephone Nigam in two metros or Bharat Sanchar Nigam in state circles, in addition to the three private firms. State-owned firms joined the race as a third operator.
Reliance, incidentally, is also keen on pitching in for the fifth operator license and is understood to be awaiting regulatory approvals.
The recent entry of Bharti Tele-Ventures into the Mumbai market as the fourth operator has taken away the market share of some existing players in the metro.
If a metro like Mumbai gets one more operator (players like Reliance, Spice, Escotel do not have a presence here), the market share of existing players like BPL Mobile, Bharti, MTNL and Hutchison could erode, though the size of the market is enhancing.
Though there could be some financial crunch, some key players could also actively look at entering certain circles, which they lost out due to strategic reasons.
For instance, Hutchison could bid for Maharashtra circle, for which talks were on with BPL Cellular for a buyout.
Another key circle could be Delhi, wherein BPL can enter as its merger with Idea Cellular has hit a roadblock.
If the government opens up the market, it could raise some more funds from cellular companies as licence fee. In the third round of bid, the government collected around Rs 1,400 crore (Rs 14 billion).
"Since this is will be for the fourth slot, companies may not be bidding aggressively, unless there is a foreign player to enter the market with financial muscle," analysts said.
This could also assist the government in achieving the teledensity target.