Telenor ASA (TEL.OS) has threatened to seek damages and compensation for its investments from the Indian government as the Norwegian company faces the risk of losing its permits to provide telecommunication services in the South Asian nation.

Telenor's over 67%-owned joint venture, Unitech Wireless Ltd., is among several companies that would lose permits to operate in India on June. 2 when a Supreme Court order to cancel their licenses would comes into effect.

In its Feb. 2 order, the court said the process to allocate the licenses in 2008 was "arbitrary and unconstitutional."

Telenor had bought its stake in Unitech Wireless from local real-estate developer Unitech Ltd. (507878.BY), after the Indian company got the licenses.

In an emailed statement Tuesday, Telenor said it has informed the government of its intent to invoke the provisions of an agreement between India and Singapore on economic cooperation to resolve the matter. Telenor had made its investments in India through a unit in Singapore.

The India-Singapore agreement allows arbitration to settle conflicts that can't be resolved through six months of consultations.

A Times of India report said Telenor has claimed damages of $14 billion from the government. Telenor, however, said it hasn't stated any amount.

Telenor said also the company is "convinced that we can resolve this matter through continuing dialogue with the government."

Government officials weren't immediately available to comment.

Another affected company--Russian conglomerate AFK Sistema (AFKS.RS)--has already asked India to settle its dispute by Aug. 28 or face legal action.

These developments add pressure on the federal government which has been rocked by a spate of corruption allegations, political instability and policy paralysis, denting India's image as a favoured foreign investment destination. The 2008 telecom license sale, which has allegedly been rigged, has been the most damaging, leading to the resignation of the minister who oversaw the transactions and his subsequent arrest.

The Supreme Court had asked the government to hold auctions to reallot licenses and bandwidth. The government said to complete an auction it expects to take at least 400 days, by which time the Norwegian company would have had to stop its operations in the country.

Telenor, which has about 40 million customers, recently requested the Supreme Court to direct the government to complete the auction by June 2.

Telenor's intention to seek compensation is a means to put pressure on the government to carry through a swift rerun of the licence auction, said Nordea analyst Stefan Gauffin.

-By Dhanya Ann Thoppil, Dow Jones Newswires; +91-9886929464; dhanya.thoppil@dowjones.com

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