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Malaysia headquartered Axiata Group threatens Indian government with international arbitration

Economic Times | Jul 23, 2012

Malaysia headquartered Axiata Group threatens Indian government with international arbitration

Joji Thomas Philip, ET Bureau

NEW DELHI: Malaysia headquartered Axiata Group, which holds about 20% stake in Idea Cellular has threatened claim damages and drag the Indian government to international arbitration under bilateral investment protection pacts (BIPA), making it the sixth international investor in the telecoms space to serve notice under bilateral trade agreements.

In an unrelated development, the home ministry has opposed Axiata’s proposal to increase its stake in Idea Cellular by acquiring shares from the stock exchange on security grounds.

Axiata, whose investments in India are routed through Mauritius, said it plans to initiate international arbitration against the Indian government, using the India-Mauritus bilateral trade agreement, after the Supreme Court in its February 2 orders cancelled 122 mobile permits issued by former telecoms minister A Raja, including seven operational licences of Idea Cellular.

In total, the SC quashed 13 permits of Idea Cellular, but six of these were overlapping licences that were not functional following the company’s acquisition of Spice Communications in 2008.

"The Supreme Court’s decision to cancel 13 of Idea Cellular’s licences without compensation and any further actions taken by the Republic of India to execute this decision amount to a clear violation of Axiata’s rights under the Mauritius-India bilateral investment treaty," the company said in its June 6 communication to Prime Minister Manmohan Singh, telecom minister Kapil Sibal, external affairs minister SM Krishna amongst others.

Axiata also said that it has and continued to suffer losses as a result of the Supreme Court’s decision. "If and when Idea Cellular’s 13 licences are cancelled, Axiata will suffer further significant losses," the communication added.

Idea Cellular, an Aditya Birla Group Company, is India’s fourth largest mobile operator by customers, has about 116 subscribers and commands about 15% revenue market share in the 14-player ultra-competitive mobile space.

Last month, ByCell, a Swiss-registered firm, promoted by Russian businessmen, whose letters of intent to launch mobile services were withdrawn by the telecom department in 2009, citing security grounds, had informed the government that it must be compensated for its losses.

Prior to that Norway’s Telenor, Russia’s Sistema, Mauritius-based investors of Loop Telecom Pvt. Ltd, Capital Global and Kaif Investment and Vodafone International Holdings BV, the holding company for Vodafone India Ltd, had served notices to the Indian government under different bilateral investment promotion and protection agreements.

Last year, Axiata had approached the foreign investment promotion board (FIPB), the apex body that approves key overseas investments into India, to acquire equity shares in Idea Cellular by executing trades on the stock exchange.

But the home ministry, in its response to the proposal said that an Axiata subsidiary by name Multinet Pakistan had the largest digital optic network in Pakistan, and this company in collaboration with Epsilon, had launched an inter-connect platform called E-Connect hub for South Asia, which provided exchange of voice and data traffic in addition to providing managed presence for local and international carriers, connecting to Epsilon’s Europe and Asia network.

"Further, the ownership of Multinet Pakistan by a Pak national and routing of traffic through its E-Connect in Karachi need to be considered, from the security point of view while taking a decision in the matter," the ministry of home affairs said in June 15 communication reviewed by ET.

 source: Economic Times