Friday 4 March 2011

How Etisalat's Efforts To Operate In India Met With A Set Back??

At the outset, let me apologize to all my readers for not posting since last December since I had to complete some assignments related to my job in Dubai. Thanks to all my readers, blog followers and friends who sent  messages and encouraged me to continue writing. I am humbled that I could make a point bold enough to accelerate your thought process. Thank you all once again.


Etisalat's hope of entering to Indian market is now being thwarted by the authorities there legally and  I see no hope in the near future for a come back. I had mentioned in my earlier posting about the mighty position of Etisalat in the Gulf region. It's next only to Saudi Tel in the Arab world and has operations in 18 countries. Soon after it's inception in UAE and enjoying the monopoly status for many years, it had pocketed enough moolah to invest in foreign markets. The reason being, a further expansion in a significant way in the UAE market in terms of new customer acquisitions was not possible as the client base got exhausted fast. And with the arrival of the second operator in 2007 (Du) the matter got further complicated. The only option with Etisalat then was to expand beyond its territorial regions.  The last 5 years we saw Etisalat spreading its wings beyond its limit to  grab shares in some of the major telecom companies in MENA and other Asian countries.

Etisalat has now a controlling stake in Mobily of Saudi Arabia. It enjoys more that 26% share in Pakistan Telecommunications Corporation Ltd (PTCL). Nigeria is the most prominent among the African nations who has the presence of Etisalat. The recent faltered attempt by Etisalat to acquire Zain's (Kuwaiti Telecom conglomerate) share in its Saudi operation and the latest news of its failure to complete due diligence process prior to the acquisition is doing the rounds now in Telecom circles questioning the genuine business interest of Etisalat. Being cash rich and having deep pockets has helped Etisalat surpass all adverse situations but only until recently.

It bite the dust with its plan of foraying into India. It's needless to mention that doing business in India unlike other places has no comparison. It's a different platform altogether. To grab a decent market share is more painful than a camel passing through a needle. Being just a Camel is not enough! There are around 6-9 existing players in each circle to compete with. There are other tricks to be played for keeping afloat which is unique to Indian business environment. Despite knowing this, Etisalat has put a wrong foot in its own shoes.

India's company laws says a foreign company will not get an exclusive start up licence in specific fields of industry. Telecommunication is one such. Government has its own reasons to restrict the operation. We all know security issues are paramount for every nation. These restrictive clauses did not stop the acquisitions hunger of Etisalat.   It has decided to go for a joint venture with an existing Indian operator. The search has ended with the spotting of SWAN TELECOM, the then licence holder for few north eastern regions in India. The Swan Telecom never had any existing operation but only has the licence from TRAI (Telecommunication Authority of India). Within a stipulated period of 6 months it has to start test service and then to full fledged operation. To the surprise of all, Swan Telecom then entered into a joint venture pact with Etisalat. For Etisalat that was the only available opportunity. In fact Etisalat was looking for a strong partner like Aditya Birla Group or Reliance. To its dismay not many Indian companies were willing to shed its stake to a foreign buyer at that point of time. A right valuation could be a significant reason for them to stay away. They knew once operational they could demand multi fold.

Etisalat continued the partnership for few more years and meanwhile tried to get the final licence for operation. By the time it has realised how difficult is to cope with bureaucratic hurdles. Initially it got a stinker from the home department against the continuance of the JV in India as it has a controlling stake in Pakistan Telecom. Policy of the Indian Government forbids granting Telecom license to a company who has operations in Pakistan ,its hostile neighbour based on strong security reasons. Etisalat's local partner somehow kept the issue under the rug but eventually could only delay the process. Local press drummed up the news 24/7and a huge uproar was there in the parliament forcing the then Telecom minister to scrutinise the whole deal.

A probe proved that Swan Telecom is under a holding company of Reliance Group owned by Anil Dhirubai Ambani. Reliance being an existing Telecom service provider for various circles in different states of India has no right to own another Telecom company under a different name and operate in same circles or other regions. That would tantamount to serious conflict of interest.Within few months the media witnessed the change of name from Swan Telecom Etisalat to Etisalat DB. It seems Swan has sold its share to another company called Dynamix Balwas (DB). This is a company owned by Shahid Balwas. There are press reports and classified documents with home department pointing Shahid's deal with Swan and Etisalat is indirectly linked to Dawood Ibrahim's business interest in India and abroad. I presume my readers need no introduction to Dawood Ibrahim and his interests. Sources confirm Millions in Dollars have rolled in and out of India to complete the transaction. The deal is now under the scanner of Indian authorities.

The latest news is Mr. Shahid Balwas , MD and Vice Chairman of Etisalat DB was arrested few weeks back by CBI and currently being probed of the 2G scam links. Investigation suggests his aquittal may not happen  easily under the current circumstances since the then minister Mr. Raja himself is too under arrest and being probed of the scam links.  Governement under Dr. Manmohan Singh is determined to grab the culprits of the 2G scam and bring before the justice system to clear the blot in its white paper.


Etisalat has few options now. If it want to run a Telecom business in India, it has to quit its Pakistan operations completely (hope i am not cynical). Furthermore it should come out unscathed of its image from the imbroglio surrounding the business venture with DB Group. Etisalat should search for a new partner who is genuinely interested in doing business in India. If that happens we could see some pyrotechnics in the sky. But the developments suggest otherwise. Let us hope Etisalat may review the whole business model and think of starting from square one. It will be good for Etisalat in the long run as a corporate, its prospective clients and for the great nation India.

Antony Konnoth
bizsense.blogspot.com