Huawei has suspended service support to Videocon Group's telecom unit and sent a legal notice for non-payment of dues of about Rs 860 crore.
The matter is related to the purchase of 2G-network equipment from Huawei in July 2009 and subsequent delivery of project services. Videocon's contractual dues include Rs 790 crore for network equipment purchases and about Rs 71 crore for services.
Videocon has not paid 85 percent of the equipment contract, amounting to $144 million.
The payment deadline was before February 2, when the Supreme Court cancelled 122 mobile operation permits, in which Videocon lost its pan-India licenses.
In 2008 Videocon got 2G spectrum for 21 circles, and in Punjab they operate as brand sharing agreement between QTL and Videocon.
"Huawei will adhere to international and local laws to realize its overdue payment," said a spokesman for Huawei.
Huawei has withdrawn services support, including annual maintenance contract, managed services delivery obligations and supply of spares, which will hurt Videocon's operations in Mumbai, Gujarat, Madhya Pradesh, Punjab and Haryana.
Videocon will participate in the upcoming airwaves auction in the 1,800 MHz band and has already met 50 percent of its rollout obligation in the circles where it holds bandwidth.
Videocon has a customer base of over 7.7 million.
Recently, Videocon said that it plans to invest Rs 1,200 crore in 2012 to expand its mobile network in India.
Videocon Telecommunications has already invested around Rs 10,000 crore to build the network.
Videocon Telecommunications reported gross revenue of Rs 141.39 crore for the quarter ended 31, December 2011, up 10.35 percent against Rs 128.13 crore for the quarter ended 30, September 2011.
For the quarter ended 31 December 2010, Videocon's gross revenue stood at Rs 99.86 crore.