-- Telenor agrees to pay 'nominal amount' to Unitech for JV
Stake
-- Unitech agrees to transfer of assets to Telenor's new
company
-- Settlement to help Telenor bid for bandwidth with new
partner
By R. Jai Krishna
NEW DELHI--Norway's Telenor ASA (TEL.OS) is moving ahead with
plans to exit Indian telecommunications joint venture Unitech
Wireless Ltd., following the settlement of a long-running dispute
with its local partner, real-estate company Unitech Ltd.
(507878.BY).
As part of the settlement, Telenor will pay Unitech a "nominal"
amount for Unitech Wireless, the companies said in a joint
statement Thursday.
The statement didn't disclose the amount, citing
"confidentiality obligations." Telenor owns about 67% of Unitech
Wireless.
The development will allow Telenor to participate in the
forthcoming telecom-bandwidth auctions in the world's
second-largest telecommunications market through a new company and
with a new partner.
Telenor wanted Unitech to exit the joint venture since
2010--when Unitech Wireless was named in a telecom-licensing
scam--but couldn't agree on a valuation for the local partner's
stake.
Their dispute deepened after February this year when the Supreme
Court of India ordered scrapping of 122 telecom licenses, including
22 of Unitech Wireless, citing corruption in their allotment in
2008. It ordered fresh auctions, now scheduled to start Nov. 12, to
reallocate the bandwidth that the companies affected by the order
need to return.
The court later allowed the companies to provide services until
Jan. 18 under the cancelled permits.
Telenor had blamed the Indian partner for its troubles as the
Norwegian company had bought the stake after Unitech got the
licenses. It had written down most of its investments in India
following the license cancellation.
Unitech's managing director, Sanjay Chandra, had been arrested
for his alleged involvement in the irregularities. Unitech and Mr.
Chandra, who is currently on bail, had previously denied any
wrongdoing.
Unitech Wireless has an about 5% share in India's
mobile-telephone market of 908.36 million subscribers.
Analysts said the settlement will allow Telenor carry on its
operations in India if it manages to buy bandwidth in the
forthcoming auction. They expect a final agreement between the
partners before Oct. 19, the last day to register for the bandwidth
auction.
Telenor said in the statement that it is preparing to
participate in the auction through a new company it plans to set
up, "but will take a final decision on whether to participate at a
later date."
The company will need a partner in India as local rules restrict
foreign ownership in telecom-services providers at 74%.
According to the terms of the settlement agreement, Unitech has
agreed to the transfer of the joint venture's assets to the new
company to be formed by Telenor. The Indian company will, however,
retain its rights on the share of any refunds of the fee Unitech
Wireless paid to the government for getting the cancelled telecom
licenses.
"Telenor gets what it wants, control in a new vehicle, while
Unitech gets to retain some economic rights (on any refunds from
the government)," said Robin Bienenstock, an analyst at research
firm Sanford C. Bernstein.
Mr. Bienenstock said Telenor has come to a "reasonable
compromise" with Unitech in a "relatively short space of time."
In a separate statement, Mr. Chandra of Unitech said his company
is "pleased" with the settlement, which will allow Unitech to focus
on its main business, real-estate development.
Unitech's shares were up nearly 14% at 26.30 rupees on the
Bombay Stock Exchange in afternoon trading, compared with a 0.9%
gain the benchmark Sensitive Index.
Write to R. Jai Krishna at krishna.jai@dowjones.com
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