In the first signs of an impending churn and possible consolidation in the Indian telecom sector after last week’s Supreme Court verdict in the 2G scam, the Bahrain-based Batelco on Wednesday said it was selling its equity stake in STel back to its Indian partner for about $175 million (approximately Rs 850 crore), the same value at which it had purchased the stake during May-June, 2009.

The apex court last we-ek cancelled 122 licences, including six of STel, on grounds of irregularity in allotments during the tenure of A Raja as telecom minister. “This is part of an earlier understanding with the Indian partner to exit, given the circumstances surrounding the 2G probe in India over the past 12 months,” Batelco said in an announcement.

“BMIC, a 100 per cent Batelco-owned subsidiary, entered into an agreement in the fourth quarter of 2011 to sell its 42.7 per cent equity in STel for $174.5 million to its Indian partner Sky City Foundation,” Batelco’s group chief executive Shaikj Mohamed bin isa Al Khalifa said in the statement. The agreed time frame for the completion of the sale is the end of October, 2012, it added.Originally promoted by Santosh Robert through Skycity Foundations (P) and Telecom Investments Mauritius, STel received telecom licences in six Category-C circles — Bihar, Orissa, Himachal Pradesh, Jammu & Kashmir, Assam and Northeast. Around the time Batelco picked up the stake in STel in May-June, 2009, Santosh Robert sold his stake to C Sivasankaran of the Chennai-based Siva Group.

A Dubai-based private equity firm, which had picked up about 6.3 per cent stake in STel around the same time Batelco bought its stake, is also said to be exiting. However, since it is not a listed entity, it is not obligated to make an announcement. The PE entity and Batelco had together picked up 49 per cent stake in STel. If Siva Group fails to find an alternate buyer, it is likely to become 100 per cent stakeholder in STel.

Reacting to Batelco’s announcement, Siva Group said: “The telecom sector had become like a badly planned hurdle race over the past two years, particularly for new operators. Batelco was very uneasy in India and expressed its wish to sell the stake.”

The Batelco statement said BMIC had decided as early as April, 2011 to actively pursue the sale of this investment. And the group had disclosed in its financial accounts for the period ending June 30, 2011, BMIC’s investment in STel was “presented as an asset held-for-sale.” BMIC had acquired the 42.7 per cent equity in STel through two transactions in May and June, 2009 for a total of $174.5 million.

As on December 31, 2011, STel had a total subscriber base of 35.49 lakh with a market share of 0.4 per cent. Private players hold 88.54 per cent market share in the market, with 0.92 crore net subscriber additions by all players during December, 2011 taking the total wireless user base in the country to 89.38 crore.

On February 6, after the Supreme Court verdict, Batelco had said it would review, together with other STel shareholders, all legal options following the handing down of the Supreme Court judgment.

It had then said as Batelco continued to grow and diversify its operations, it intended to explore all options to remain involved in the Indian telecommunications market. Siva Group said the transaction was entered into before the SC judgment.

“We discussed the way forward and Batelco agreed to sell its shares and exit. On or around October 2011, the Siva Group offered to purchase the shares and also sought a year’s time to consummate this transaction. The one year time was to look for an alternate investor or if everything goes well, Siva Group itself to repurchase the BMIC stake in STel,” the company said. “Under the present circumstances, we are discussing the modalities with our partner and we hope we will overcome the temporary setback in a confident and successful manner. These are early days to speak about the transaction, which was entered into before the Supreme Court judgment. At the moment, we are looking at options before us, including filing a review petition before the Supreme Court. The SC has granted four months’ time and any clarity would be arrived only around June 2012,” it added.