Etisalat Records $827 Million Loss after India Supreme Court Ruling on Spectrum Allocation

Emirates Telecommunication Corp – better known as Etisalat – has taken an $827 million hit on its earnings after India’s Supreme Court canceled 121 licenses in connection with a far-reaching 2008 spectrum scandal, according to news reports.

In a recent report, The Times of India speculated the write-off was “a possible precursor to the UAE-based Etisalat's pullout from the troubled Indian telecom market.” It was also reported that Etisalat is probably not going to bid on new auctions for spectrum but may get involved in the India market later via mergers and acquisitions, an unnamed source told the Times of India.

Etisalat has some 45 percent in Etisalat DB, a joint venture with DB Group, which got involved in the 2G spectrum controversy. In 2008, Etisalat paid $900 million for a 45 percent stake in Swan Telecom and invested about $1 billion in India, according to The Times of India report. The troubled 2008 sale of 2G cell phone spectrum included Swan Telecom, according to The Washington Post.

Etisalat was one of the carriers which were named by MobilityTechzone as vulnerable in losing the most money from the controversy. Also named were Russia's Sistema and Telenor, Reuters said. The carriers may appeal the case in court, MobilityTechzone adds.

In a related matter, Telenor will write off $721 million, according to news reports. In addition, Bahrain Telecommunications (Batelco) will leave India by selling a 43 percent stake in S Tel, according to The Times of India.

"Even prior to the SC [Supreme Court] judgment, there were operators who had got into exit mode as their business was not viable in India,” Ashish Basil, a partner at Ernst & Young, told The Times of India. “All they were waiting for was some clarity on the M&A policy so that they could sell and get some value for spectrum. But the court ruling has fast-tracked their exits."

Last week, India’s Supreme Court ordered that 122 licenses made to mobile phone companies be revoked. The Los Angeles Times reports there could be four or five carriers in the future, down from the dozen or so now operating in India, according to the LA Times. Allegations were made that 2G spectrum was distributed at older prices, causing the government to lose over $39 billion, MobilityTechzone reported.