Uninor Dissolution: Telenor Forges Ahead in Indian Telecom Market
Unitech, a prominent real estate developer, and Telenor, a Norwegian telecom group, ventured into the Indian telecom market with their joint venture, Uninor, in 2008. However, Telenor now aims to establish a new entity and secure its position in the region, particularly following the 2G spectrum allocation scandal.
Telenor has formally announced its separation from Unitech and the formation of a new entity to acquire operating licenses. This decision follows the court's cancellation of 122 regional operating permits, including those held by Uninor. This restructuring allows Telenor to continue operations in India, though it must now strategically assess the financial implications of reacquiring licenses.
Telenor's Auction Participation
The company has expressed its intention to participate in the upcoming 2G spectrum auction under the new entity, though it has yet to confirm its final decision. This auction follows the 2008 2G spectrum corruption scandal, which resulted in significant revenue losses for the Indian government, estimated at $36 billion. The scandal stemmed from the sale of mobile phone permits below market value, leading to the resignation of two government ministers.
Unitech and Telenor Part Ways
Telenor attributed the license cancellation to Unitech. Uninor, the brand name of the joint venture, combined elements of both Unitech and Telenor. Initially, Unitech resisted the dissolution, citing veto rights to block asset transfers. However, they have agreed to sell their stake to Telenor for a nominal amount.
The license cancellation led Telenor to write down 8.1 billion crowns worth of Indian assets. The company confirmed that it is in discussions with various potential partners in India. Telenor has set an October 18 deadline to decide on participation in the November spectrum auction. While the new licensing round presents significant financial challenges, Telenor has affirmed its commitment to a transparent bidding process.
Telenor's Search for an Indian Partner
Indian law mandates a maximum of 74 percent foreign ownership in telecom services, necessitating Telenor's search for a domestic partner. With the dissolution of Uninor, all legal disputes and claims between Unitech and Telenor have been resolved or withdrawn. Unitech plans to refocus on real estate ventures. The company believes this shift will lead to greater financial success in the future.