We were telco partners, but now only litigants

MUMBAI, INDIA: India's telecom industry is passing through its toughest time since the Supreme Court ordered cancellation of 122 licences of local as well as global mobile firms operating in the country under joint partnerships.

Among the joint partnerships that have turned sour over the apex court's verdict involves Etisalat-DB Group (EDB) and Telenor-Unitech Group (Uninor). Once these entities had sworn to stand with each other and make their business big in India's telecom sector, but today they are resorting to court and legal proceedings to save their hefty investments, assets and brand names.

Though the UAE-based Etisalat telecom firm has exited India, it has ensured that its former partner DB Group doesn't get peace of mind in its absence. The firm has filed legal proceedings against the Dynamix Balwas (DB) Group's promoters Vinod Goenka, Shahid Balwa and Majestic Infracon Pvt Ltd under allegations of fraud and misrepresentation.

Also read: Etisalat halts India operations

In a statement Etisalat said, “It was induced into its investment in the company that was then Swan Telecom, without any disclosure of the matters that are now alleged by the CBI and Supreme Court to have occurred in connection with the obtaining of 2G licences by EDB. Those events occurred a year before Etisalat’s investment.”

“Etisalat is facing very significant financial losses on its investment in EDB, despite its having no involvement in the 2G licence application or award process and being entirely innocent of any allegations relating to it. Mr Balwa, Mr Goenka and Majestic Infracon Pvt Ltd were responsible for Swan at that time and for subsequently marketing the investment opportunity to Etisalat,” company stated.

Back in 2008, Etisalat had paid $900 million for its stake in Swan Telecom, later renamed as Etisalat DB, with Majestic Infracon owning 45.7 percent shares.

Meanwhile, the Norway-based Telenor which operates in India through a joint venture Uninor with the Unitech Group has approached the Company Law Board (CLB) for protecting its investments and rights against its former partner.

“Telenor Group is avoiding its partnership with Unitech on account of fraud and misrepresentation. On February 24, we moved the Company Law Board to prevent any wrongful obstruction of our effort to secure our investments and the welfare of Uninor’s 40 million customers, employees and partners,” Telenor said in a statement.

In reply, Unitech Group too has moved to CLB demanding protection for its investments and interests against Telenor.

“Telenor is trying to rescind the shareholders’ agreement and annul the Articles of Uninor only to get out of certain protective provisions for the minority shareholders, including the non-competitive provision. Even prior to the Supreme Court's order on striking down the policy of the government of India with respect to the grant of UAS licences – Telenor has been pursuing the sole objective of pushing Unitech out of Uninor and assuming complete control over Uninor in abrogation of all the rights of Unitech under the articles of Uninor,” Unitech said in a statement.

Further, Unitech said, “It is equally sensitive to the interests of customers, employees, and other stakeholders of Uninor but will continue to resist any malafide and/or unilateral action by Telenor.”

The situation reminds of the “tariff wars”days of the operators but now are the days of “legal wars” among the partners rather than competitors. And in the coming months, many more such “legal wars” are expected to be fought in Indian courts by the joint partners against each other.

Interestingly, according to market analysts, the apex court's verdict is helping Indian telecom sector in a great way as it would bring in the much needed market consolidation, which has been overcrowded by too many players — some of them are pure telecom entities while others are non-telecom businesses but entered the telecom market through joint partnerships.