Telenor deepens row with Unitech over asset sale

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Telenor's Indian mobile phone joint venture gained approval from the majority of its board members to auction off the business, deepening a row between the Norwegian carrier and local partner Unitech Ltd which is opposing the sale.

Telenor is seeking to scrap the JV and migrate its business to a new company to seek fresh operating licences, after the JV's telecoms permits were ordered to be revoked by the Supreme Court which in February declared all permits awarded in a scandal-tainted 2008 sale 'illegal and quashed'.

Unitech, which owns just under a third of the JV, has opposed Telenor's move and has said the Norwegian company cannot unilaterally scrap the JV agreement and that it had veto rights to block any asset transfer. Telenor controls the JV with a 67.25 per cent ownership.

The JV -- Unitech Wireless (Tamilnadu) Private Ltd -- is calling potential bidders to express their interest by August 6, according to an auction notice published in the Financial Express newspaper.

Telenor is willing to participate in the auction through an Indian affiliate company, the notice said, adding that in case there is just one bidder, it would have the right to fix the bid price at a 'fair market value' of Rs 41.9 billion.

Unitech's nominee directors on the JV's board have 'recorded their dissent' to such an auction, the JV said in the notice.

A spokesman for Unitech Ltd said his company will take 'legal action' against the proposed auction, without elaborating.

Telenor, which had accused Unitech of 'fraud and misrepresentation' after the licence cancellation order, on Wednesday contested Unitech's claims that it had veto rights to block any asset transfer.

"As regards Unitech's veto rights, we believe these are automatically forfeited once it is established that the shareholders' agreement and all rights enshrined in it, was based on fraud," Telenor spokesman Glenn Mandelid said in a statement.

"We are willing to establish this in court, should the need arise."

Separately, the JV, which operates under the Uninor brand name, said on Wednesday that the planned auction will help it 'generate the maximum possible return' for its creditors and also 'secure the future' of its customers, employees and business partners.

The JV has about Rs 80 billion of loans from banks.

The JV, which is set to lose its permits in September, must bid in an airwave auction planned later this year to continue its operations.

Telenor last month restructured the India business with plans to cut hundreds of jobs and pare back operations in some of its operating zones in a cost-cutting drive, which some analysts saw as signal that it will stay in the country.

Earlier the Norwegian carrier had said it would pull out of India if the airwave auction rules are not favourable. India's cabinet is yet to finalise the rules and the auction starting price.

Telenor's Indian JV has been the most aggressive of newer telecoms carriers, and had more than 45 million customers as of June, or a 5 percent share of the market of more than 930 million mobile users.