Bahrain's Batelco sells India venture after telecom scandal

Bahrain Telecommunications Co (Batelco) has agreed to sell its 43% stake in Indian affiliate S-Tel for USD 175 million, in the first foreign exit since India scrapped 122 telecoms licences last week as part of a corruption probe.

Batelco will sell the stake to India partner Sky City Foundation Limited and will receive the same price it paid to acquire its holding in S Tel in 2009, the Bahraini operator said on Wednesday.

On February 2, the Supreme Court of India scrapped 122 licences held by eight operators amid a 2G telecoms scandal.

Batelco said the deal would be completed by the fourth quarter. S-Tel was not immediately available for comment.

"This is a part of an earlier understanding with its Indian Partner to exit, given the circumstances surrounding the 2G probe in India over the past twelve months," Batelco said in a statement.

The now-revoked licences were awarded in 2008, before Batelco bought into S-Tel.

S-Tel had 3.6 million customers as of December and ranks 12th out of 15 players by subscriber base. It has licences for six of India's 22 zones.

India's older mobile carriers such as Bharti and Vodafone's local unit are seen as major beneficiaries of the court ruling last week to revoke licences given to newer companies.

The ruling is likely to accelerate the winnowing of an industry that has long been seen as ripe for consolidation.

United Arab Emirates operator Etisalat owns a 45% stake in India affiliate Etisalat DB which also lost its licence last week. Etisalat has said it would study the court judgement, but declined to say on whether it would now seek to exit the country.

CNBC-TV18's Malvika Jain says that Bahrain Telecom is going to be the first telecom company to exit India after the Supreme Court's order. It is going to exit it's 42.7% stake for USD 174.5 million to S-Tel. When these licenses had been cancelled, the government had said that it will bring in stability and it is actually going to encourage foreign investors, but we are seeing a reverse trend.

Even Telenor, though it has said that it is going to seek review of the Supreme Court order, it has expressed that exit is an option. So, it seems that the Supreme Courts order has not worked well with foreign investors if the current trend is anything to go by.