Karela Fry

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Deeper waters

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India’s telecom market was the world’s fastest growing. The large customer base once made it a lucrative market globally, even though the returns per customer was lower than anywhere else in the world. When news of the 2G telecom scam broke it was clear that things were going to change. One of the changes was the cancellation of 122 telecom licences ordered by the supreme court. This was a depth charge: the effects showed up over the weeks as the disturbance spread through the industry. The waters will roil for a while yet. WSJ reports:

Emirates Telecommunications Corp., known as Etisalat, said Wednesday it will shut down Indian unit Etisalat DB’s operations, after the country’s Supreme Court ordered to cancel all mobile-telecommunications service licenses issued in 2008 on complaints of corruption in their allotment.

“As unanimously resolved by the board this evening, Etisalat DB will be taking steps to reduce operating costs, including the suspension of its network and services,” Etisalat said in an emailed statement. “The decision has been taken in order to protect the interests of all stakeholders and to avoid incurring further costs at this time of rapid change and continued uncertainty in the Indian telecommunications sector.”

Etisalat said Wednesday that it will make a decision on its participation in the Indian market when there is clarity on the auction process, and greater legal and regulatory certainty.

Etisalat said Feb. 9 that it would recognize an impairment charge in its 2011 financial statements amounting to 3.04 billion U.A.E. dirhams ($827 million) against the full carrying value of goodwill and the net assets, including licenses of its Indian operations. The telco’s fourth-quarter net profit fell 65% to AED705 million on the charge.

Etisalat holds 44.73% of Etisalat DB Telecom Pvt. Ltd., the Indian joint venture in which Majestic Infracon owns 45.73%.

Etisalat bought the stake in the company, then called Swan Telecom Pvt. Ltd., before allegations over the scam broke out but after Swan was awarded the licenses in early 2008.

Bahrain Telecommunications Co., known as Batelco, also had its Indian license canceled, but managed to sell its 42.7% stake to its Indian partner Sky City Foundation for 65.8 million Bahraini dinars ($173.6 million). Batelco earlier on Wednesday said that will continue to look for opportunities in the Indian telecoms market.

Following this ET reported:

UAE telecoms operator Etisalat has sued its Indian joint venture partners for fraud, the former monopoly said on Thursday, following a top court’s recent order to cancel its affiliates licenses amid a corruption probe.

Etisalat has launched legal proceedings against Vinod Goenka and Shahid Balwa, top executives at its India partner DB Group, and Majestic Infracon Private Limited, a DB Group company, for fraud and misrepresentation.

This thread of the story is not going to peter out soon. Moneycontrol reports:

Telecom tribunal [Telecom Disputes Settlement & Appellate Tribunal] TDSAT today issued a notice to Etisalat DB on Reliance Infratel’s plea seeking to recover Rs 1,200 crore from the operator.

A TDSAT bench headed by its Chairman Justice S B Sinha asked the company to file a short reply within two weeks and posted the matter on March 5 for next hearing.

The Anil Ambani group company is seeking to recover Rs 1,200 crore from Etisalat DB which had taken its telecom infrastructure on lease. The counsel appearing for the Anil Ambani group company told the tribunal that Reliance Infratel was under pressure after the recent developments concerning Etisalat DB, which has decided to shut down its Indian operations.

Reliance Infratel further said that the company wanted to secure its due amount, which is around Rs 1,200 crore. Etisalat DB is a joint venture between Etisalat of United Arab Emirates and Dynamix Balwas Group of India. The JV had telecom services license to operate in 15 circles.

Reliance Infratel is a subsidiary of Reliance Com.

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  1. […] right that wrong led the supreme court to cancel a large number of licences at one go. This led to foreign investors trying to withdraw from the Indian market. The bellwether case is that of Uninor, formerly a joint venture between […]


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