Loop Telecom latest casualty of 2G ruling

A man smokes in front of a closed shop displaying the Loop mobile logo on its shutter in Mumbai February 2, 2012.

MUMBAI (Reuters) - Loop Telecom will close down its operations after losing its licenses in the wake of an alleged multi-billion dollar corruption scandal, a company spokesman said, while its sister company Loop Mobile would continue operations in Mumbai.

Supreme Court in February ordered cancellation of 122 telecoms licences held by eight operators, including that of Loop Telecom, because of alleged irregularities in the way they were awarded in 2008.

The CAG estimated New Delhi may have lost as much as $34 billion as the permits were given out at "unbelievably low" prices.

Loop is the third casualty of the court ruling, after Abu Dhabi's Etisalat said it would close its Indian operation and Bahrain's Batelco agreed to sell its 43 percent stake in its Indian joint venture.

"We have no choice given the Supreme Court judgment," a spokesman for Loop Telecom told Reuters.

Loop Telecom has written to the government to demand a 38 billion rupee refund for its license fees plus interest, compensation charges and bank guarantees, the Mint newspaper reported on Tuesday, citing a letter signed by the company's managing director.

The company spokesman confirmed the letter had been sent, but declined to comment on the amount demanded.

Loop Telecom has contacted its around 6,000 subscribers to urge them to switch to an alternative mobile telecom provider. The decision will not impact Loop Mobile, a company in the Loop Group that runs mobile services in the city of Mumbai.

"Loop Mobile and Loop Telecom are separate legal entities," a spokeswoman for Loop Mobile told Reuters in a statement.

Loop Mobile received no licenses in the 2008 allocation.

India is the world's second-biggest mobile phone market with more than 900 million subscribers. Bharti Airtel (BRTI.NS), Reliance Communications (RLCM.NS), Vodafone (VOD.L) India and Idea Cellular (IDEA.NS) dominate the market with a combined share of about 65 percent.

(Reporting by Henry Foy; Editing by Ranjit Gangadharan)