Etisalat’s Indian partner Majestic denies allegations

Majestic Infracon, the business partner for UAE-based Etisalat in India, has responded to the statement issued by the UAE operator on Pratap Ghose, the CFO of their Indian joint venture Etisalat DB.

It denied it was responsible for the sorry state of the Indian joint venture and said it will file a case of defamation against the foreign partner.

Majestic and Etisalat have had a major fall-out after their joint venture failed to take off properly. The company is one of the several whose telecom licenses have been cancelled by the Indian Supreme Court after it would that they were issued in violation of laws and norms.

Etisalat DB is currently in the process of being wound up.

The following is the excerpted text of the statement issued by Majestic.

“At the outset, we are extremely shocked and surprised at the content and tone of the statement, and more pertinently Etisalat’s covert attempt at portraying a factually incorrect position… We reiterate, as we have done in the past and which is the factually correct position, that Etisalat is and its representatives have at all material times been in complete control (including by virtue of their majority on the Board) of EDB and hence, responsible for EDB’s current state of affairs.

Pratap Ghose who is the Chief Financial Officer of EDB is a nominee of Etisalat.

While we, are concerned about the safety and security of all employees of Etisalat, including of secondees such as Mr. Pratap Ghose, we cannot be held responsible for any action brought upon EDB, its directors, employees or secondees, since such action is a result of the gross mismanagement by the persons in control…

The fact that Etisalat is in control of EDB is known to all. Etisalat is now portraying that the CEO Atul Jhamb is a nominee of Majestic which is far from the truth. The factual position is that Atul Jhamb though the CEO of the Company was stripped of all decisions making authority to the extent that without the approval of the nominee of Etisalat heading the Project Management Office, Majed Al Musali, he (Atul Jhamb) could not even authorize payments of even single rupee or hire anyone or do anything whatsoever in discharge of this duty. Atul Jhamb has no financial authority and cannot sign any cheques independently.

In fact the channel partners have been interacting through meetings and conference call with the staff of EDB, including Atul Jhamb and have realized that Etisalat nominees are in control of EDB … all the top management of EDB, who are nominees of Etisalat and who are UAE nationals, have left the country and have not come back for the last 45 days although EDB is going through a crisis…

..Majestic has and will never do anything detriment to EDB.. Amongst other matters, they [Etisalat] deployed several expatriates as employees of EDB at huge salaries who would travel back to U.A.E. every week, which was objected to by Majestic as bad business practice, and being against the best interests of EDB.

As is evident, instead of functioning as per the agreed business plan and availing of the first mover advantage, Etisalat permitted inaction of their nominated senior officers, resulting in the competition moving much faster than EDB in encashing the business opportunities, and resulting in a fundamental erosion of the value of EDB. Today, Uninor has more than 40 million subscribers whereas EDB did not gain even a fraction of the subscriber base. All of this is solely because of Etisalat’s failure to operate EDB efficiently.

Etisalat failed to pay the subscription money and control premium payable by it (in excess of US$ 400 million), thereby committing a breach of the Shareholders Agreement. This left EDB short of funds to conduct its business as planned, only due to Etisalat’s default.

Etisalat also delayed its obligations to bring further capital into EDB within the time period stipulated, did not implement the rollout as per the UASL conditions, resulting in EDB paying penalties and losing opportunities and revenues.

Etisalat lacked commitment and competence to implement a full launch.. and allowed complete inefficiency on the part of senior officials nominated by Etisalat to continue unabated despite being warned about the same in advance by Majestic…

This situation is completely independent of the allegations made against Mr. Shahid Balwa and Mr. Vinod Goenka relating to the allotment of licenses and spectrum. Similarly placed companies have been galloping to garner market share even as the shareholders continue to have differences…

Further, Etisalat at the Board Meeting of EDB held on February 22, 2012, EDB (being controlled by Etisalat’s representatives) purportedly passed two contrary resolutions, viz. to file a review petition to challenge the Supreme Court Order dated February 02, 2012 cancelling the 122 UASLs (which was supported by our nominee directors) and to shut down the operations of EDB in India (which was opposed by the directors strongly).

Thereafter, we were shocked to see Etisalat’s nominee directors unilaterally deciding to pass an illegal resolution to immediately shut down the operations of EDB without any prior notice to us despite the ILD, NLD and ISP licenses still being valid. In fact Majestic’s nominee directors on the board of EDB resigned in protest because of the acts of commission and omission, deliberate incorrect recording of minutes and blatantly false allegations of Etisalat. the EDB Board it was resolved that the salary of the employees and Government taxes would be continued to be paid. Etisalat thereafter through its nominated representatives, who direct the business of EDB, have authorized and directed various payments to be made to various parties (which payments have not been approved by the Board to our knowledge), and chose not to make payment to the employees of EDB. It was only pursuant to a Court order which was supported by Majestic that the employees were paid…

Majestic strongly refutes all the allegations.. foisted by Etisalat and its nominees and hopes better sense even at this late hour will prevail in the best interest of all stakeholders. However, Majestic, separately will be initiating appropriate legal proceedings against Etisalat for defamation, breach of trust and under other provisions of law, as it will be advised.”