New Delhi: In a move that clears the decks for Norway-based Telenor ASA to participate in the coming 2G auction, and get a new partner for its telecom venture in India, the company has signed an amicable settlement with Indian realty major Unitech Ltd, its joint venture (JV) partner for telecom services provider Uninor.
The move marks the end of a four-year partnership, two of which were rife with conflict.
“Telenor and Unitech Ltd have on 10 October 2012 reached an agreement to amicably settle all disputes between the two parties. The parties are bound by confidentiality obligations, and are therefore not able to provide any further comments on specific terms and conditions in the settlement. However, it can be confirmed that the parties agree to support the transfer of the business in Unitech Wireless (Uninor) to a new entity (NewCo) controlled by Telenor. Telenor is preparing to participate in the upcoming 2G spectrum auction through this new entity, but will take a final decision on whether to participate at a later date,” a Telenor release said.
The statement added that Unitech will get a nominal amount for agreeing to sell its stake, but will retain the economic rights associated with its current shareholding in Unitech Wireless. If there are any funds remaining after the dissolution of the shareholding, then following appropriate accounting practices, the shareholders will divide the money.
In October 2008, Unitech and Telenor announced a JV, Uninor, after the former’s telecom subsidiary that held telecom licences, Unitech Wireless, issued fresh equity amounting to a 60% stake to the Norwegian company. Telenor’s stake was subsequently increased to 67.25%. In all, the Norwegian telco infused around Rs.6,100 crore as equity in the company. Unitech had the rest.
Financing and the so-called 2G scam were the primary reasons for the partners falling out.
After allegations surfaced that Unitech may have been favoured by the then telecom minister, the legality of the licences held by Uninor came into question. The telco found it difficult to raise funds and decided to go in for a rights issue (a share sale to existing shareholders) to raise around Rs.8,200 crore. Unitech didn’t agree (maybe because the promoters didn’t want to put in that equity). The two companies also differed on the valuation of the JV. The partners tried to settle the issue through arbitration.
Then, on 2 February 2012, the Supreme Court ruling in the 2G case, scrapped 122 licences, including 22 of Uninor’s. Telenor sought an indemnity and compensation from the Indian partner. At the time of the cancellation, Uninor had more than 36 million subscribers and had invested approximately Rs.14,000 crore, including some Rs.8,000 crore in debt.
In early August, Uninor announced a move to auction the assets of the company, prompting Unitech to file a rash of cases.
Thursday’s settlement resolves all those issues.
“With immediate effect, Unitech Ltd nominees will withdraw from the Uninor board and all special shareholder rights stands suspended. Subsequent to a successful business transfer and spectrum auction, all disputes and claims between the parties shall stand withdrawn or concluded,” Telenor said.
The resolution of the dispute lends some certitude to Telenor’s plans for India.
“Telenor can go in for the auction and find a partner without Unitech stalling and creating problems at every step,” a Mumbai-based telecom analyst with a multinational brokerage firm said, speaking on condition of anonymity as he’s not authorized to speak to the media.