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Foreign operators hit by Indian licence cancellations

UAE telecoms giant Etisalat has reported a drop in profit after downgrading the value of its Indian operations following the country’s blanket cancellation of GSM licences. The operator’s net profit was reported at AED5.84 billion (around US$1.59 billion) for the full year of 2011, down from AED7.63 billion (US$2.07 billion) the previous year.

Etisalat’s Indian operations are tied to financial statements worth AED3.04 billion (US$827 million) on which the operator is planning to take out an impairment charge – a move which will have a net impact of around AED1.02 billion (around US$277 million) on the operator’s consolidated net profit.

Etisalat entered the Indian market via a joint venture with local partner Swan Telecom, which obtained a licence during the 2008 process along with seven other firms. The startup operator, Etisalat DB, is 45% owned by Etisalat, which has stated that it is reviewing its “strategic options” in India.

While it has confirmed that it is looking into the “legal consequences” of having its licence cancelled, Etisalat is actively distancing itself from the issue, noting that Swan Telecom was the party which obtained the licence originally.

“The Supreme Court decision relates to events that occurred in January 2008, well before December 2008 when Etisalat invested in Swan. Etisalat has no knowledge of what occurred in the licence application process for Swan, far less did it have any involvement”, said Etisalat in a statement.

It is not the only foreign operator to be affected by the ruling – its Norwegian rival Telenor has similarly been forced to revalue its Indian operations following the cancellation of its licence. Its Indian operations (Uninor) have accrued an impairment loss of NOK4.1 billion (US$712 million), pushing Telenor into the red for Q411.

Jon Fredrik Baksaas, president and CEO of Telenor, stated that the firm would attempt “to protect our investments in all possible manners, and will consider every option prior to any further investments.”

Across Q411, Telenor’s net loss was NOK1.9 billion – the same period in the previous year saw it make a profit of NOK2.1 billion. While the firm did make a profit of NOK7.9 billion for the full year, this was a substantial drop from the previous year’s NOK14.3 billion profit. Revenue however was up from NOK94.8 billion to NOK98.5 billion.

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