New Delhi: Efforts to secure long-term funding for Uninor, a telecom joint venture between Norway’s Telenor ASA and Unitech Ltd, received a boost on Friday with the Supreme Court directing the Punjab and Haryana high court to pass a judgement on a dispute between the two partners on the modalities of raising around Rs 6,700 crore.
The apex court directed the high court to constitute a fresh bench to hear the case and pass a judgement within three weeks. The top court has also said that if the court does not come out with its judgment within that time, the restraining order on Uninor would be lifted.
Earlier this year, the Uninor board had ruled in favour of a rights issue as the telco was unable to secure long-term debt funding from banks for more than a year, an executive with the company said, requesting anonymity.
“The money is needed to roll out our services across the country as soon as possible,” he said
However, Unitech opposed this move saying that the joint venture should continue looking for long-term debt funding as agreed to at the time of setting up the joint venture.
Unitech was further able to secure a restraining order from the Gurgaon district court which was upheld by the Punjab and Haryana high court. The order did not allow Telenor to begin work on the rights offer.
A rights offer refers to the process of raising funds from existing shareholders in a manner equal to the quantum of stake they hold. Telenor holds around 67% of the telcom joint venture with the remainder held by Unitech.
At the time of setting up the Indian venture, the two partners had agreed that around Rs 6,000 crore equity funding would come from Telenor while the remainder would come from banks as long-term debt.
However, because of a number of policy issues and the ongoing investigation into telecom spectrum allocation, the firm has been unable to secure long-term funding from banks since the middle of last year.
We are dependent on short-term, project-based funding, with Telenor standing as guarantor, which is not sustainable, the executive cited above said.
The two partners are also in the midst of an arbitration process in Singapore to resolve the issue.
This is not the first time that Telenor’s rights issue has run into trouble. In January 2009, Telenor had proposed a $1.6-billion rights issue for buying Unitech Wireless’ equity stake.