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Etisalat Files Lawsuit Against Swan Telecom Promoters

Shortly after announcing its intentions to shut down its network in India, Etisalat has filed a lawsuit against its Indian partners, DB Realty promoters Shahid Balwa, Vinod Goenka and Majestic Infracon Pvt Ltd for fraud and misrepresentation.

In a press statement, Etisalat has stated that this measure was necessary to protect its interests and those of its shareholders, since the company was facing significant financial losses on its investment in Etisalat DB (EDB), despite having no involvement in the 2G license auction process. The company added that it was induced by Shahid Balwa, Vinod Goenka and Majestic Infracon Pvt Ltd for its investment in Swan Telecom, without any information on how the latter had obtained 2G licenses for Etisalat DB since it had occurred a year before its investment in Swan Telecom.

In 2008, Etisalat had picked up a 45 percent stake in Swan Telecom for $900 million and in June 2009, Swan Telecom was renamed as Etisalat DB. It had licenses for 13 telecom circles in India which includes Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu (including Chennai), Uttar Pradesh (East) and Uttar Pradesh (West). The telecom company gained licenses for two more circles – Madhya Pradesh and Bihar, by the virtue of Allianz Infratech acquisition in May 2009.

In March 2010, it launched its GSM services under the brand name Cheers Mobile, although Reliance Communication (R COM) with which the operator shared the network infrastructure, had reportedly disconnected its services due to non-payment of pending dues in January 2012. As of December-end 2011, Etisalat DB had 1,610,824 connections, however only 25.45% of that base was active.

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Etisalat DB’s licenses were scrapped earlier this month, as part of the 122 licenses scrapped by the Supreme Court, following which Etisalat had recently written off $827 million of its investment as impairment charge.

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