BackTelenor gives Citi mandate to search for a new partner
Telenor gives Citi mandate to search for a new partner
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Mumbai/New Delhi: Norway’s Telenor ASA, the world’s seventh largest telecom service provider, has asked Citi Global Markets India Pvt. Ltd to find it a new Indian partner to replace Unitech Ltd, which is strongly resisting the move.
The Norwegian firm, which operates in 13 other markets around the world, wrote off $721 million (around ₹ 4,040 crore today) in licences and goodwill in India after its 22 mobile licences were among those cancelled by the Supreme Court in a 2 February order over alleged irregularities in the allotment of 2G spectrum in 2008. The apex court also ordered the government to re-auction the freed-up spectrum, which has to be done by 31 August. Mint had reported last week that the government is likely to seek an extension from the Supreme Court on this deadline.
“Telenor has given the mandate to Citi to negotiate and shortlist a partner. The mandate was given around (a) few weeks back. Once the new partner is selected, the (current joint venture’s) 36.31 million subscribers will be transferred to the new entity," said a person aware of the development on condition of anonymity.
All existing assets of the joint venture in India, Uninor, will eventually be transferred to the new company, a move contested by Unitech. Both sides have taken their dispute to the Delhi high court as well as the Company Law Board, and are also looking at arbitration.
Telenor joined hands with real estate company Unitech in 2009 to set up Uninor with an investment of ₹ 6,100 crore for a 67.25% stake.
Another person aware of the development, who also didn’t want to be identified, confirmed that Citi has the Telenor mandate.
“Telenor is looking at various options on how to continue in India," this person said. “The real wait is for the auction price. They need an Indian partner to participate in the auction process. Telenor is keen on being a majority partner. The Indian partner could be anyone…in all likelihood, it will be a corporate entity. The possibility of it being a telecom (company) is low."
Sigve Brekke, head of Asia operations for the Telenor Group, in February said, “We don’t see a future with Unitech, and because of that we will now start seeking a new partner... We have started the process. We intend to take in a 26% partner, so the intent for Telenor is to go up to 74%."
While a Citi spokesperson declined to comment, a Telenor spokesperson said in an emailed response, “As we have stated earlier, our plan is to form a new company with a new Indian partner and transfer Uninor assets to that company. This company will be the platform to approach the auctions with. We are in dialogue with some such potential partners, and beyond this, we have nothing new to add."
A Unitech spokesperson declined to comment.
The Hindu Business Line newspaper reported on 4 July that “Telenor has sent feelers to Tata Teleservices for a possible strategic alliance".
Uninor, which has a 4.06% share of the 893.84 million subscriber market, operates in 13 circles (covering 75% of industry revenue and subscribers), and had 22.4% of the 9.47 million subscribers added by the industry in December—the second highest after Idea Cellular Ltd.
“Telenor’s Indian unit (Uninor) has a subscriber base that is heavily skewed towards a handful of circles in which it has had particularly strong traction," JP Morgan Equity Research said in a 27 June report. “The company has only launched commercially in 13 of the 22 circles across India."
The report said Telenor can retain two-thirds of its customer base without breaching its ₹ 15,500 crore funding limit by cherry-picking key circles.
“Exiting subscale regions will accelerate the point of Ebitda (earnings before interest, taxes, depreciation and amortization) break-even," it said. “Under this scenario, even staying in India could be 5% accretive to group EFCF (equity free cash flow)."
Telenor may also be able to use its Indian losses to create a $500 million tax asset, the JP Morgan report added.
deepti.c@livemint.com
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