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Etisalat DB partners in legal dispute over mismanagement claims

Relations between the owners of the beleaguered Indian operator Etisalat DB have soured to the point of conflict, with Indian DB Group initiating legal proceedings against UAE-based Etisalat on the grounds that it violated the terms of their joint venture agreement.

Etisalat has dismissed the case as “a cynical tactical move by parties charged with major corruption offences to shift attention away from their own situation and to disrupt the proper running of Etisalat DB to the detriment of its shareholders and customers.”

DB Group subsidiary Majestic Infracon holds the majority 45.73% stake in Etisalat DB, while Etisalat holds a marginally smaller 44.73% stake. Majestic Infracon is controlled by two currently incarcerated executives of DB Group, Shahid Usman Balwa and Vinod Goenka. The two executives have been implicated in India’s 2008 2G licensing scandal and stand accused of obtaining spectrum via bribery.

Etisalat’s statement touched on this, remarking that the “management of Etisalat DB has been made dramatically more difficult by Mr Balwa and Mr Goenka being in prison.” It also attempts to absolve itself of wrongdoing, noting that its investment in Etisalat DB’s previous incarnation, Swan Telecom, was made once the licences had already been obtained, and that it is "investigating closely the circumstances in which Mr Balwa persuaded it to invest in Swan.”

Etisalat DB has recently incurred a US$1.6 billion fine, as Etisalat’s stake allegedly violates Indian laws regarding foreign ownership.

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