Setbacks that have checked progress in a huge market

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MUMBAI // Etisalat's Indian subsidiary has been facing a series of setbacks that are hindering the company's prospects in the world's second-fastest growing telecommunications market, analysts say.

Etisalat DB, a joint venture between Etisalat and India's Swan Telecom, is among nearly a dozen companies accused of sidestepping government rules in 2008 to buy second-generation phone licences at discounted prices, resulting in a revenue loss of 309.84 billion rupees (Dh25.6bn) for the treasury.

On Saturday, India's central bureau of investigation (CBI) formally charged the Swan Telecom directors Shahid Balwa and Vinod Goenka, along with seven others. Both men deny any wrongdoing.

Etisalat, which owns a 45 per cent stake in Etisalat DB, has distanced itself from the situation. In February, the company said the licences were awarded before it entered the Swan partnership.

With an ambition to expand in India, which is home to more than 700 million mobile phone subscribers, Etisalat entered a deal to buy a stake in Swan Telecom in 2008.

That deal, the CBI claimed in an Indian court last week, violated foreign investment and foreign exchange rules. The government has not yet initiated legal proceedings.

In December, the telecoms ministry recovered US$2.2 million (Dh8m) from Etisalat DB because the company missed a deadline for rolling out 2G services in four zones.

The ministry imposed similar penalties on Aircel, Uninor and Dishnet.

Even after paying the fine last December, Etisalat DB was given a "show cause" notice last month concerning the cancellation of its licence for its Delhi and Mumbai areas of operations by India's telecoms department.