Batelco’s costly Indian journey faces further complications

Batelco today issued a statement that in conjunction with STel management, other STel shareholders and legal advisers, the telco is carefully studying the detailed judgement handed down by the Supreme Court of India on February 3, 2012, which cancelled all 122 2G licences issued in 2008 and allocated spectrum granted to eight operators, including STel.

Batelco stated that 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 telecom 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.

The Bahrain telco has held a 42.7 per cent equity stake in STel since May 2009 and as at December 31, 2011; Batelco was carrying the value of its equity in STel at US$123.3 million.

Batelco’s investment in India has been a costly one, and has consistently dragged down the telco’s overall profitability. Last May it was rumoured that the Bahrain telco was reconsidering its Indian expansion strategy following the intensification of operating conditions in the mobile market and regulatory restrictions that were pushing up costs.

Peter Kaliaropoulos, Batelco’s CEO at the time was quoted as saying the market was proving to be far more challenging than expected and that the slashing of phone call tariffs had been worse than even the “worst case scenarios” the company modelled when analysing the initial investment.