Indonesia announced a significant policy U-turn, allowing Qatar Telecomto buy up to 65 per cent of Indosat, the country's second largest mobile phone company, not the 49 per cent as previously stated.

Observers say the decision sends mixed messages about Indonesia's investment climate because while encouraging foreign control of prominent companies, the move leaves certain issues unresolved.

Under laws passed last year, foreigners are allowed to own only 49 per cent of fixed-line telecoms companies but 65 per cent of mobile operators. Both rules give the owner operating control but the latter figure ensures greater comfort that its authority cannot be challenged. Indosat has a fixed-line business but is primarily a mobile operator.

When making the announcement, Sri Mulyani Indrawati, the chief economics minister, declined to explain the change or whether any conditions were attached.

She said regulations governing the deal would be clarified soon.

QTel told the Financial Times that the company was still awaiting details of the decision but was "cautiously very pleased".

QTel said it would seek to acquire a majority of Indosat as soon as the authorities permitted, but declined to give a figure on the size of its preferred final stake.

If no conditions are imposed on QTel, it would be a significant step towards the completion of what has been a risk-laden purchase.

The Qataris completed the $1.8bn purchase of 40.8 per cent of Indosat in August, from Asia Mobile Holdings, which was 75 per cent owned by Singapore Technologies Telemedia and the rest by QTel.

But it was only confirmed in September when Indonesia's supreme court overturned a lower court verdict restricting whom STT could sell its shares to.

Then the communication and information minister said the Qataris would be limited to 49 per cent because Indosat has a small fixed-line business and foreign investment in such companies is capped at that level.

The capital market regulator reached a similar conclusion, claiming that QTel's purchase was a direct investment rather than a portfolio investment and so should be governed by direct investment regulations.