Middle-East mobile operator Emirates Telecommunications, known as Etisalat, is suspending its network and services in India, following a court order cancelling the mobile licenses of its Indian joint venture.
The move will affect close to 1.7 million mobile subscribers of the Indian startup, which is still a fraction of the about 894 million mobile subscribers India had at the end of December, according to data from the Telecom Regulatory Authority of India (TRAI).
India's Supreme Court ordered earlier this month that 122 2G licenses in 22 service areas issued in 2008 should be canceled within four months, as they had been purchased by business entities that manipulated the system. TRAI was instructed by the court to auction the spectrum and licenses released as a result.
The order in the 2G scam case has affected the Indian operations of Telenor, NTT DoCoMo, Sistema, and Etisalat, some of whom have said they will seek a review from the court.
Etisalat said in a statement late Wednesday that its joint venture, Etisalat DB, will be taking steps to reduce operating costs, including the suspension of its network and services. The court's decision has removed Etisalat DB's ability to operate from June 2, it added.
The company, like other affected multinational companies, holds that it was not a participant in the controversial events that led to the award of the licenses in 2008, and had only acquired a stake in a company that had bagged the licenses. "The factors behind the Supreme Court judgment are based on actions that took place long before Etisalat entered the Indian market and considered investing in Swan Telecom," it said.
On Thursday, Etisalat initiated legal action against the Indian promoters of the joint venture. The operator alleged that it invested in the company without knowing the license allotment issues that later led to an investigation by the country's Central Bureau of Investigation, and subsequent court order.
Etisalat took an impairment charge earlier this month in its 2011 consolidated financial statements of UAE Dirhams 3 billion (US$828 million) against goodwill and net assets including licenses of its Indian operation.
The company did not rule out participating in the new auctions to be announced by TRAI. "Etisalat will make a decision 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," it said.
Telenor has meanwhile sought indemnity and compensation from its Indian joint venture partner after the cancellation of its 22 2G licenses by the court. It said it was looking for a new joint venture partner, and did not rule out participating in the spectrum auction.
Companies planning to start afresh in India's mobile market will however have to reckon with competition from large incumbents like Bharti Airtel and Vodafone India, and the slowing subscriber growth in the country, said Kamlesh Bhatia, principal research analyst at Gartner. "They have to come in with a clear strategy around differentiated services, customer service, and content," he added.