Etisalat DB to shut operations

Telecom operator Etisalat DB on Wednesday said it is shutting operations, three weeks after the Supreme Court cancelled its licences.

“The decision of the Supreme Court of India to revoke UAS licences has removed Etisalat DB’s ability to operate from June 2, 2012. As unanimously resolved by the board this evening, Etisalat DB will be taking steps to reduce operating costs, including the suspension of network and services, pursuant to the terms of its unified access service licences,” the company said in a press release. The company's licences in 15 circles have been cancelled as a part of the court's verdict.

Etisalat said this decision has been taken to protect the interests of its stakeholders and avoid incurring further costs. The company noted this is a time of rapid change and continued uncertainty in the Indian telecommunications sector.

This is the second company to take this decision after STel decided to shut shop, yesterday. STel said it would be winding operations in six circles, which it had won in 2008. In total, licences of eight companies were cancelled by the apex court.

“The Emirates Telecomm-unications Corporation — Etisalat believes this is a sensible and wholly appropriate action under the circumstances. Etisalat will make a decision on 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,” the company's statement said.

Etisalat bought into Swan Telecom by investing $900 mn (Rs 3,987 cr) in September 2008. The United Arab Emirates telecom major has 45 per cent stake in the company and the rest is held by DB group, which also has interests in real estate and hospitality.

Two weeks back, the parent company took an impairment charge over licence cancellation, in its 2011 consolidated financial statement, amounting to AED 3,044 million (Rs 4,048 cr). The net impact of this impairment charge on on its consolidated net profit, amounts to AED 1,020 million (Rs 1,356 cr).

The Middle Eastern major also exonerated itself from the 2G scam, which led to the SC cancelling all the 122 licences issued by the telecom ministry in 2008. DB group founder Shahid Balwa spent seven months in Tihar Jail over connection with the scam.

“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,” the company said.

Etisalat DB also said the official cessation date will be communicated to customers, through the appropriate channels. The company has 1.3 million subscribers in total.