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Etisalat to quit Indian telecom market
(Flare (Pakistan) Via Acquire Media NewsEdge) 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, says Etisalat
The Indian 2G licensing scandal reached a sensational crescendo early in February as the country’s Supreme Court declared invalid the 122 2G licences that were controversially issued in 2008 by then telecom minister A. Raja. The licences in question were awarded on a first come first served basis amid accusations of bribery and corruption, and sold at values set in 2001, rather than through an auction.
The Comptroller and Auditor General of India submitted a report to the Indian government in 2010 which argued that, by severely undervaluing the spectrum, Raja, who is currently in jail, cost the national purse as much as $40billion.
This figure has been disputed by the Indian regulator, TRAI, and the Central Bureau of Investigation, however. The 2008 sell-off was intended partly to bring new players into the market, and several large operators including NTT DoCoMo, Telenor and Etisalat now face their spectrum being reclaimed. The Indian Government has indicated its intention to reallocate the disputed spectrum, most likely through an auction process.
After Bahrain Telecom, Etisalat is the second foreign company to exit India. Etisalat DB an Abu Dhabi based Telecom Company following Supreme Court order of cancelling its telecom licenses will shutdown its operation from India. The company responded in an e-mail, "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, pursuant to the terms of its UAS licenses."
Etisalat said: "The decision has been taken in order to protect the interests of all stake-holders and to avoid incurring further costs at this time of rapid change and continued uncertainty in the Indian telecommunications sector."
The company added, "Further information, including the official cessation date will be communicated shortly to EDB's customers through the appropriate channels."
Recently Supreme Court had cancelled all 122 UAS licenses regarding irregularities in allotting 2G spectrums. The 2008 licence sales are at the heart of one of India's biggest corruption scandals in which former telecom minister A. Raja is alleged to have mis-sold permits and favoured some firms, costing the treasury up to $39 billion.
Etisalat owns a 45 percent stake in Etisalat DB, a joint venture with Indian real estate player DB Group that has 1.7 million subscribers.
DB Group was among a number of Indian companies with no telecom experience that bid for mobile licences and then sold stakes in their cellular ventures to foreign investors, including Etisalat and Norway's Telenor, for hefty sums.
Raja, senior government officials and top executives of DB and other companies are among nearly 20 people facing charges over the scandal.
Etisalat wrote off $820 million in connection with its Indian venture following the court ruling. It said it wanted to avoid "incurring further costs at this time of rapid change and continued uncertainty in the Indian telecommunications sector. The Supreme Court has ordered the government to issue fresh licences through an auction. But analysts have said some companies hit by the ruling might not have the desire or resources to bid again and defend businesses still in start-up mode.
Etisalat said it would decide on its "future participation in the Indian market when there is clarity on the auction process and telecommunications policy and greater legal and regulatory certainty and stability." Etisalat paid $900 million for its stake in the Indian mobile operation, and said it invested a similar sum developing the venture.
Etisalat DB was the 14th largest out of 15 players. Norwegian investor Telenor has said it wants to continue its operations in India, the world's second-largest mobile market after China, but has ditched its Indian partner, accusing it of fraud.
The reduction in the number of mobile players is seen by many analysts as a good development for the congested sector as cut-throat competition has slashed call costs and hit profits.
Meanwhile, India's Tech Mahindra Ltd is awaiting "official communication" from Etisalat , the company said, after a media report that the carrier has cancelled its outsourcing contract with the Indian provider as it shuts down its India network.
"We await official communication from them on the decision about cessation of operations. We will have discussion with them subsequently," Tech Mahindra said in a statement. It did not elaborate.
Etisalat said its Indian joint venture Etisalat DB will shut down the operations of its Indian joint venture, after an Indian court ordered cancellation of the local affiliate's licence amid a corruption probe.
Financial news website moneycontrol.com reported earlier Etisalat DB's outsourcing contract to Tech Mahindra, valued at $400 million over 10 years, had been cancelled, citing sources it didn't name. The report quoted sources as saying that Tech Mahindra will likely invoke a bank guarantee of up to 5 billion rupees.
"They are a global company, and we believe they will take care of their contractual obligations," Tech Mahindra's chief executive Vineet Nayyar told reporters, declining to give details. Tech Mahindra provides IT services to the telecom sector and counts London-listed BT Group and Vodafone, U.S.-based AT and T andMotorola, and France's Alcatel-Lucent among its clients.
The Supreme Court has ordered the government to issue fresh licences through an auction, but Etisalat said it would decide on its "future participation in the Indian market when there is clarity on the auction process and telecommunications policy and greater legal and regulatory certainty and stability
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