Batelco ‘reviews sustainability’ of Indian unit following licence cancellations

8 Feb 2012

Bahrain Telecommunications Company (Batelco) has stated that it is studying the judgement handed down by the Supreme Court of India on 3 February 2012, which cancelled all 122 2G licences issued in 2008 and allocated spectrum granted to eight operators, including STel, in which Batelco holds a 42.7% equity stake. A statement reads: ‘Whilst the immediate focus is on STel’s customers, employees and suppliers, STel shareholders will also review the sustainability of its business operations under the revised conditions imposed by the Indian Supreme Court’s recent judgement impacting the telecoms industry. Batelco was not involved in the STel licence application process nor had any knowledge of any of the events surrounding the granting of the 2G licences in January 2008… Batelco invested in STel following a diligence exercise with the support of financial and commercial advisers. It also received certain representations and warranties from STel’s promoter regarding the validity of the licence. Batelco respects and abides by all legal and regulatory rulings and determinations in every market it operates. Batelco will review, together with other STel shareholders, all legal options following the handing down of the Indian Supreme Court judgement. As Batelco continues to grow and diversify its operations, it intends to explore all options to remain involved in the Indian telecommunications market.’

TeleGeography notes that in Batelco’s quarterly group reports, the Bahrain-based company has classified STel as ‘Held for Sale’ from Q2 2011 onwards, meaning that it has been reconsidering its expansion strategy in India in light of the level of competition in the sector, coupled with regulatory restrictions which it says have driven up costs. CEO Peter Kaliaropoulos has admitted the market has been more challenging than expected, while cuts in tariffs have been heavier than in worst-case scenario models analysed by Batelco when it first considered investing in India. STel is the only one of the seven private operators that won 3G spectrum in India not to have introduced commercial 3G services, according to TeleGeography’s GlobalComms Database. Batelco says that at 31 December 2011 the carrying value of its equity in STel was USD123.3 million.

Bahrain, India, Bahrain Telecommunications Company (Batelco), STel (India)