Batelco Sells India Stake After Supreme Court Cancels Mobile-Phone Permits

Bahrain Telecommunications Co. (BATELCO) sold its stake in an Indian mobile-phone operator after the nation’s top court last week canceled licenses in a corruption probe.

Batelco, as the Manama, Bahrain-based company is known, sold its entire 42.7 percent stake in STel Pvt. to Sky City Foundation Ltd. for $174.5 million, it said in a statement yesterday. The Middle Eastern phone company and Dubai-based Millennium Private Equity invested $225 million in the Indian venture when they entered the country in January 2009.

Batelco’s exit is the first by a foreign investor after India’s Supreme Court on Feb. 2 canceled wireless permits won by 11 companies including STel in a 2008 sale, which is being probed by federal auditors and investigators. The Indian units of Norway’s Telenor ASA (TEL) and Emirates Telecommunications Corp., the United Arab Emirates’ biggest phone company, are also affected by the cancellation of permits.

“Smaller companies will just want to cut their losses and exit,” said Romal Shetty, executive director of the telecommunications division at KPMG’s Indian unit. “For large players like Etisalat, it’s a catch-22 situation but quitting India will be their last option.”

The Supreme Court ruling came 14 months after India’s chief auditor said the sale at “unbelievably low” prices may have cost the exchequer as much as $31 billion.

The court asked the Telecom Regulatory Authority of India to recommend the next course of action, which could include an auction for the permits.

‘Wait and See’

Foreign investors “will probably wait to see the terms and conditions of the spectrum rebid process” before deciding on a course of action, KPMG’s Shetty said.

The Comptroller and Auditor General said in a report submitted on Nov. 16, 2010, that the cut-price, first-come, first-served sale four years ago to ineligible bidders was “arbitrary and lacked transparency.” Jailed former telecommunications minister Andimuthu Raja, bureaucrats and company officials are facing charges that they conspired to grant permits for personal benefit. All deny wrongdoing.

The court canceled all permits held by Uninor, the venture between Telenor and Unitech Group, which owns India’s second- largest developer, and Etisalat DB Telecom Pvt., a partnership between Emirates Telecommunications and DB Group.

It also canceled most permits held by Videocon Telecommunications, Loop Telecom Ltd. and Russian billionaire Vladimir Evtushenkov’s Sistema Shyam Teleservices Ltd.

Telenor will look at “all options,” including bidding for spectrum licenses canceled by India, before it considers exiting the country, Sigve Brekke, head of the company’s Asia operations, said at a press conference in New Delhi on Feb. 6.

Sistema Shyam will contest the court order, according to a Feb. 4 statement.

To contact the reporters on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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