Abu Dhabi-based telecoms firm Etisalat says it is closing down its India operations after a recent Supreme Court order cancelled its licence.
Etisalat is the second company after Bahrain Telecom to exit its joint venture in India.
The Supreme Court recently cancelled 122 licences issued by former minister A Raja, who is accused of fraud.
India's auditors say the wrong awarding of licences cost the country $40bn. Mr Raja denies any wrongdoing.
India is one of the world's fastest growing markets for mobile telephones with 893 million connections.
The court ruling has come as a major setback for the government, which has been hit by a series of corruption scandals in recent months.
"The decision of the Supreme Court of India to revoke all 122 licenses issued by the government in January 2008... has removed Etisalat's ability to operate from 2 June 2012," the company said in a statement.
It said the firm had decided to take "steps to reduce operating costs, including the suspension of its network and services".
"The decision has been taken in order to protect the interests of all stakeholders and to avoid incurring further costs at this time of rapid change and continued uncertainty in the Indian telecommunications sector."
Etisalat said it would decide on its future participation when there was "clarity on the auction process".
Etisalat owns a 45% stake in Etisalat DB, a joint venture with Indian real estate company DB Group.