Telco JVs stuck as partners differ on funding

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Jan 25 2012, 07:09am hrs
Late entrant mobile telephony joint venture companies, which sought to build business with overseas partners, are getting stuck as differences crop up on fresh investments to scale up.

On Tuesday, Reliance Communications (RCom) said it has stopped providing their telecom towers to carry Etisalat DB Indias signals for not paying dues. Etisalat DB is a joint venture between the Abu Dhabi-based Etisalat and Indias real estate developer DB Corp, which had won licence in 2008 to provide mobile telephony to 15 territories. Etisalat had purchased 44.73% stake for $900 million in 2008 and DB Realty holds 45%.

Despite repeated reminders, payments have been inordinately delayed by Etisalat DB without any reasonable cause, leading to the disconnection of services, said an RCom spokesperson.

Services of Etisalat DB were facing disruptions since Friday, but the company said this was a technical issue. Etisalat DB apologises to its customers for a temporary mobile service disruption on Friday due to a technical issue beyond our control, the company said in a media statement on Friday. Our team has been working round-the-clock to resolve the issue and restore the mobile services at the earliest.

In July 2009, Etisalat DB had signed a 10-year period infrastructure sharing deal with Reliance Infratel, RComs tower operating company, to enable it to rollout services faster. The deal was estimated to fetch R10,000 crore to RComs rental revenues in 10 years. Etisalat also has an IT application and infrastructure agreement with Tech Mahindra for 10 years for R2,000 crore.

Both Etisalat and DB Group did not respond to emails at the time of going to press. Etisalats attempt to increase its stake to 49% in the JV had hit an FIPB roadblock, said an analyst on the condition of anonymity. Its Indian partner Dynamix Balwas Group is also not putting in funds in the venture.

In October 2011, real estate developer Unitech Reality had taken its Norwegian partner Telenor group to Company Law Board alleging mismanagement of operations of their joint venture mobile telephony company Uninor India. The two partners have also fought over a rights issue proposal to raise R8,250 crore to fund expansion.

Uninor already has a lot of debt but, of course, also needs equity in order to keep a reasonable capital structure, says Erik Strandin Pers, telecom analyst at Norwegian Danske Bank which tracks Telenor.

However, to my knowledge, Unitech has refused to, or been unable to, guarantee its part of the debt. Therefore, Telenor has effectively had to supply the debt itself by guaranteeing 100% of it, allthough it only owns two-thirds of Uninor. No surprise it wants to raise equity, he added.

Etisalat DB (formerly Swan Telecom), which offers service under Cheers brand, owns 1.6 million subscribers, of the total 886.4 million subscribers in country. According to data released by the Telecom Regulatory Authority of India, Etisalat DB had a gross revenues of just around R21 crore in the fiscal quarter ended September 30, 2011.

Relations between the partners soured in the past. DB Group had dragged it to the Company Law Board in July 2011 alleging failure of its partner Etisalat to perform certain obligations. The issue was settled amicably.