"In terms of market valuation, it could be close to Rs 1000 crore," said a top official from international investment and merchant banking firm Communications Equity Associates (CEA) which is undertaking negotiations on behalf of the ISPs. All three ISPs are Category A nationwide ISPs, one of them being Dishnet Limited, which has already launched internet services in Pune and Chennai. The other two are yet to launch their services.

Although the maximum permissible stake for a foreign partner is 49 per cent under the ISP policy, the equity is likely to be offloaded only in small tranches to get the best valuation. "From a commercial point of view, it makes sense to raise more equity when your subscriber base has improved and you can get a bettervaluation," said an industry observer.

Some months back, Satyam Infoway had offloaded 20 per cent of its equity to the Commonwealth Development Corporation at $ 5 million. The three ISPs are also likely to follow a similar route. "The foreign partner may typically take around 26 per cent stake. This will ensure no resolution can be passed without its approval," said the CEA official. Negotiations for Dishnet Limited, one of the three ISPs, are at an advanced stage and an overseas partner is likely to be finalised in some weeks. The partner is likely to be a European or US firm in the telecom or IT business. The remaining two deals could happen before December, according to a source.

"Many foreign companies have burnt their fingers in the cellular business in India... they are very circumspect about getting into the country again," said the CEA official, "Only those with deep pockets and sound business strategy are being considered".

Dishnet Limited, for instance, is part of the Sterling group owned byNRI businessman C Sivasankaran. The group is pumping Rs 80 crore to Rs 100 crore in the internet venture. "All the three ISPs are investing over Rs 50 crore in internet venture," he added, refusing to reveal who the ISPs were.CEA is one of the largest investment banks specialising exclusively in media, telecommunications and entertainment. To date, it has completed more than $13 billion in transactions involving more than 500 companies worldwide. India along with China together are estimated to constitute one-third of world's internet business in the coming years because of their huge populations. "Most of the big players will want to come to India. In a year's time we should see companies like AT&T and MCI looking at acquiring ISPs," said the industry source.