Reliance pulls plug on Etisalat venture

Etisalat's Indian venture is in dispute over unpaid bills with the company that provides it with mobile towers.

An Indian mobile-phone mast operator has cut off access to a joint venture controlled by Etisalat, the UAE's biggest telecommunications operator, in a dispute over allegedly unpaid bills.

Reliance Communications claims Etisalat DB, a joint venture between the UAE operator Etisalat and Dynamix Balwas group, has not paid its bills to use Reliance's mobile mast infrastructure.

As a result Reliance said it had decided to cut off access to the mobile masts.

"Despite repeated reminders, payments have been inordinately delayed by EDB [Etisalat DB] without any reasonable cause," Reliance Communications said.

But analysts doubted the motive behind the move.

"I doubt there is a genuine financial concern at play here. After all we are talking a very small amount of revenue Reliance would get from Etisalat DB since the company is a minor player here," said Ankita Somani, Associate IT &Telecom at Angel Brokers.

Market watchers speculated that the move could be politically motivated. Several telecoms companies are under investigation in an alleged licensing scandal over the allocation of 2G network spectrum that were allegedly sold below-market-price in 2008.

India's Central Bureau of Investigation (CBI) claims when the government granted 122 new mobile licences in 2007 and 2008, several companies allegedly paid bribes to government officials to obtain the licences below market price. It said the process of issuing licences was not transparent or fair.

Some Etisalat DB executives were arrested in February last year part of the 2G investigation. All of the accused have denied the charges and none of them were Etisalat employees, as the UAE company had not struck its joint venture in India at the time of the alleged scandal

Etisalat DB issued a statement apologising to its customers for "a temporary mobile service disruption", adding it was working around-the-clock to resolve the issue. "This is a local matter between EDB and its vendor, therefore it is not appropriate for us to comment," Etisalat said in a statement emailed to Reuters.

"We are being advised regularly by EDB's management team and we encourage both parties to reach a resolution quickly."

The prosecutors estimate the total alleged dealings cost in the region of US$33 billion (Dh121.21bn) in lost revenues. India's government credibility suffered badly after the alleged scandal broke.

Five companies and their joint-ventures are involved in the licensing investigation. They include Etisalat DB, Norway's Telenor, Russia's Sistema, India's Loop Telecommunication and Videocon. All deny any wrongdoing.

Etisalat arrived in India in 2008 after it signed a deal to buy 45 per cent in DB Reality held Swan Telecom for $900 million. Reliance and Etisalat signed a 10-year, $2bn deal in 2009.