Foreign Telecom Firms Pass on India

Foreign companies are steering clear of an auction of Indian mobile-phone bandwidth in a sign of how far the nation's once-booming telecommunications industry has fallen from investor grace.
On Monday, Australia's Telstra Corp. and Sweden's TeliaSonera AB said they won't participate in the coming sale. Meanwhile, Norway's Telenor ASA threatened to pull out of India, saying that the new base rates proposed by India's telecom regulator for the auctions are far too high. The government expects to complete the auction rules by the end of May, with the auction likely to take place at the end of August.

India was until recently a favored investment destination for many foreign companies, especially telecom operators who wanted to offset slowing growth in their home markets.
Companies such as Singapore Telecommunications Ltd., Japan's NTT DoCoMo Inc. and Britain's Vodafone Group PLC have invested in India directly or through local operators, driving the pace of growth in India's telecom sector to the fastest in the world.
But a scandal over alleged improper conduct by the government and companies during an attempt to sell second-generation wireless spectrum in 2008 has marred the industry's image. A federal investigation agency accuses then-Telecommunications Minister Andimuthu Raja and two associates of taking millions of dollars in bribes for handing out the licenses, and says the alleged irregularities deprived the government of potential revenue of $7 billion. Mr. Raja, who is in jail while his trial is under way, has been charged with offenses including cheating and bribery. He has pleaded not guilty.
India's Supreme Court in February canceled 122 telecom licenses, including 22 held by Telenor, at the center of the corruption case.
Other recent developments have muddied India as an investment destination, too, including a recent proposal by the government to retroactively tax foreign investment deals involving Indian assets.
Vodafone, which in 2007 purchased Hutchison Whampoa Ltd.'s stake in an Indian company, is likely to be particularly hit by the tax move. If India's Parliament approves the proposal, the company might have to pay more than $2 billion in taxes.
In the Telenor issue, the company said it is "working actively" to get an acceptable solution to the new auction proposals. But, because of the uncertain policy environment, it has decided to write down its remaining assets in India, amounting to 3.9 billion Norwegian kroner ($681 million). It had previously written down 4.2 billion kroner in relation to licenses and goodwill in the South Asian nation.
Another foreign company, Bahrain Telecommunications Co., said Monday that it might invest in some existing operators but that it is unlikely to participate in the auctions.
Telstra, in an emailed statement, didn't say why it won't participate in the auctions, while TeliaSonera, Europe's fifth-largest mobile phone operator, said it isn't interested.
U.S. company AT&T Inc., which often has been said to have a keen interest in the Indian telecom sector, declined to comment.
The cold response indicates the companies are wary of the risks of investing in India, said Romal Shetty, national head for telecom at consulting firm KPMG. "Foreign investors want certainty on regulations," he said.