Etisalat DB faces India hurdles

Etisalat's Indian subsidiary has paid the price for not launching 2G mobiles services on time with a Dh8.1 million (US$2.2m) fine from the Indian Government.

Etisalat's Indian business operates in 15 regions and has about 132,000 subscribers as of last month. Raminder Pal Singh / EPA

Etisalat's Indian subsidiary has paid an Dh8.1 million (US$2.2m) penalty to the Indian Government for failing to launch second-generation mobile services on time but faces further charges relating to spectrum licences the operator was awarded in 2008.
Last month, Etisalat DB was named among the companies in a government report that found the prices paid for companies were "unbelievably low" and forced Andimuthu Raja, India's telecommunications minister, to resign from his post.
The Indian government is now determining whether it should rescind some or all of the 122 spectrum licences it awarded in 2008 to nine companies for 123.9 billion rupees (Dh10.12bn). The auditor general alleged that as much as $40bn of revenue was potentially lost by the government.
Etisalat acquired a 45 per cent stake in Swan Telecom, its Indian unit's former name, for $900m in March last year in a deal that included management control. The remaining 55 per cent is held by Dynamix Balwas Group and Genex Exim, two Indian companies.
The auditor also determined that Etisalat was one of several operators that failed to launch its mobile services after agreeing to do so one year after being awarded its licences.
On Wednesday, Etisalat paid the penalty but did so "under protest".
"Etisalat DB has received a communication from [the department of telecommunications] for imposition of liquidated damages towards roll-out obligation for the first year in respect of four telecom circles aggregating Rs 9.9 crore," Etisalat said in a statement.
Majed al Musalli, the chief executive of Etisalat DB, said the operator was ready to move forward from the allegations and was looking to expand aggressively in the competitive Indian telecoms market.
"Everything is fine and we own the spectrum," Mr al Musalli said. "We are moving forward and we recently launched in Delhi [last month]. We will be doing similar launches in other circles as well."
Etisalat's Indian business operates in 15 regions under the Cheers Mobile brand and had about 132,000 subscribers as of last month, the most recent month for which data was available, according to the country's telecoms regulator.
But Etisalat faces another legal challenge as the government is set to determine in the next two months the penalties that operators should face for acquiring their allegedly undervalued licences. Industry observers say that the measures could range from charging the difference in the licence's value to rescinding licences.
"Over the next 45 days the operators will give their response to the government over how they obtained the new licences," said an Indian telecoms analyst who declined to be named. "Then the government will decide at that point in time whether the licences have met the appropriate criteria to be awarded, and may take some action."
But the analyst said it was likely that the damage had already been done, as the government had experienced wide-ranging fallout from the auditor's report and investors were now beginning to think twice about investing in the Indian telecoms market.
"The most likely scenario will be an appropriate penalty to be paid from the operators to avoid disruption of mobile services," the analyst said.
Mr al Musalli declined to comment on the upcoming government ruling.
 
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