Tuesday, Feb 07, 2012

(This story was originally published Monday.)

--Batelco unit Stel among those telcos affected by judgement

--Says was not involved in STel licence application process

--Will review legal options together with other STel shareholders

--Company to explore all options to remain involved in Indian telecom market

By Shereen El Gazzar

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Bahrain Telecommunications Co., or Batelco, the country's biggest telecom operator, on Monday said it's studying the judgement delivered by India's top court regarding the cancellation of the 2G license issued to its Indian unit STel.

India's Supreme Court last week cancelled all mobile-telecom-service licenses issued without auction after January 2008, raising uncertainty over billions of dollars that international companies have invested in the South Asian nation.

Batelco, in conjunction with STel management, other STel shareholders and legal advisers are carefully studying the detailed judgement handed down by the Supreme Court of India that cancelled 2G licences issued in 2008 and allocated spectrum granted to operators including STel, Batelco said in an emailed statement.

Batelco holds 42.7% equity in STel since May 2009. The company, in the statement, said it was not involved in the STel licence application process and it did not have any knowledge of the events surrounding the granting of the 2G licences in January 2008.

The Supreme Court scrapped 122 licenses issued to nine companies across India's 22 telecom services areas--each service area requires a separate license--but said the affected companies can continue operations until the government finalizes new rules for allotting licenses and bandwidth.

"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 said in the statement.

Batelco added that it intends "to explore all options to remain involved in the Indian telecommunications market."

Nishit Lakhotia, a senior analyst at Bahrain-based investment bank SICO said that the financial impact on Batelco will depend on the warranties it has received from STel's promoter regarding the validity of the cancelled 2G licenses, and the valuation of STel's 3G licenses, which are not affected by the verdict, in addition to any possible recoveries from STel's already made investments.

Batelco in the statement said it received certain representations and warranties from STel's promoter regarding the validity of the licence. It however didn't disclose any details of the warranties.

"Batelco has been looking at the possibility of exiting STel since early 2011. However, after the recent Indian Supreme Court verdict cancelling STel's 2G licenses, Batelco will have to reassess its strategy for India," Lakhotia said.

Gulf telcos such as Batelco and U.A.E.'s Emirates Telecommunications Corp., or Etisalat, had bought stakes in companies that got licenses in 2008 as India presented a major growth market for them.

The court ruling, which comes on complaints of corruption in the license allotment, raises concerns about the foreign investment climate in India, Asia's third-largest economy.

Etisalat said Thursday it wants to study the impact of the court order and its ramifications on its operations in India, particularly its customers and employees.

"Etisalat and Batelco invested in India because they hoped to take advantage of the huge size and growth of the Indian mobile market," said Matthew Reed, a senior analyst at Informa Telecoms and Media.

"For both [Etisalat and Batelco], their next steps will probably depend in part on what the Indian authorities plan to do about issuing new licences," said Reed.

-By Shereen El Gazzar, Dow Jones Newswires; +971 444 61684; Shereen.elgazzar@dowjones.com

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

07-02-12 0358GMT