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Telenor signals end of ties with Unitech

Telenor signals end of ties with Unitech

New Delhi: Norwegian telephone company Telenor ASA issued a notice to real-estate developer Unitech Ltd, its joint venture partner in Indian telecom services provider Uninor, saying it would seek indemnity and compensation after the cancellation of Uninor’s 22 licences by the Supreme Court.

“Telenor Group’s position is that the strategic partnership with Unitech Ltd does not have a future, and it therefore will start the process of looking for a new Indian partner," Telenor said in a statement late on Wednesday.

On 2 February, the Supreme Court scrapped 122 telecom licenses given to nine companies in January 2008, in an order connected with alleged irregularities in the issue of second-generation spectrum and licences.

The companies included Unitech Wireless Ltd (Uninor), STel Ltd, Videocon, Dynamix Balwas (Etisalat DB), Loop, Sistema Shyam Teleservices Ltd as well as Idea Cellular and Tata Teleservices Ltd.

Telenor said at the time that it had already invested more than 6,100 crore in equity and over 8,000 crore in corporate debt guarantees in the venture.

“Telenor Group holds Unitech Ltd liable for the breach of warranties related to the cancellation of the licences—seeking compensation for all investment, guarantees and damages caused by the Supreme Court order," it said. “Telenor Group also makes an indemnity claim against Unitech for the failure to obtain spectrum in the strategically critical Delhi circle."

Unitech said in a statement that it was “surprised to receive the indemnity claim from Telenor taking a plea of the order passed by the Hon’ble Supreme Court and simultaneous release of press statement by Telenor, which is a clear violation  of the confidentiality covenants of the shareholders’ agreement. At best, Telenor can claim damages from the government under the investment bilateral treaty. We reserve our right to take appropriate legal action against Telenor for damages caused to Unitech Group from breach of the confidentiality obligation by Telenor."

Telenor is the seventh-largest telco in the world by subscribers and entered the Indian market in October 2008. The company holds a 67.25% stake in Uninor, which has so far garnered some 40 million subscribers.

“The legality and validity of the licences was a fundamental term of the share subscription agreement between Telenor Group and Unitech Ltd. We believe that the Supreme Court’s cancellation of the Unified Access Service Licences (UASLs) conclusively demonstrates a clear breach of Unitech’s warranties," said Pål Wien Espen, Telenor group general counsel.

“In the share subscription agreement between the partners, Unitech Ltd has irrevocably and unconditionally agreed to indemnify and hold harmless the Telenor Group from all damages which may be suffered as a result of breach of any of the agreed warranties," the statement added. “The fact is that Uninor, as a consequence of the judgement will no longer hold any UASLs. Telenor will therefore exercise its entitled right under the share subscription agreement to hold Unitech Ltd liable to indemnify and compensate Telenor Group for its investment in India," Espen said.

shauvik.g@livemint.com

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