Telenor bags 67.25% in Unitech Wireless

Written by Corporate Bureau | New Delhi | Updated: Mar 18 2009, 06:35am hrs
In just five months, the enterprise valuation of Unitech Wirelessthe telecom arm of cash-strapped realty firm Unitech Ltdhas dropped by 10.78%. The math is simple. Last October, Norwegian telecom operator Telenor had agreed to buy up to 60% stake in Unitech Wireless for Rs 6,120 crore, valuing the company at Rs 10,200 crore after deducting its Rs 1,000 crore debt. On Tuesday, Unitech Wireless said Telenor would now get around 67.25% stake for the same sum.

Unitech Wireless did not cite reasons for the drop in its valuation. But analysts attribute it to the impact of the global economic meltdown and the poor business prospects of greenfield telecom projects in India. This, despite the country emerging the worlds fastest-growing telecom market with over 10 million new subscribers every month.

The worldwide financial crisis also hit Telenors fund raising plans. It earlier scrapped a 12-billion krone rights issue, opting to raise money through a combination of cash flow and additional debt. The Norwegian government, which holds 54% stake in Telenor, had expressed inability to subscribe to the issue.

With the readjustment in valuation, Telenors share purchase transaction with Unitech Wireless has finally been concluded. That comes as good news to the latters cash-strapped parent, Unitech Ltd, which has a total debt of around Rs 8,350 crore on its books.

Of this, it had to pay Rs 2,500 crore by March end. The company has rolled over Rs 1,800 crore and is looking for ways to raise the balance. With the flow of Telenors funds, Unitech Wireless can now start repaying the Rs 2,000 crore that it owes Unitech Ltd. Unitech Ltds shares on the BSE closed down 1.33% at Rs 25.95 on Tuesday.

The first phase of the deal was scheduled to close by last December. But it was postponed because Telenor wanted Unitech to first finalise a tower-sharing agreement, which was recently signed with the Tata Teleservices-Quippo JV tower firm. Telenor is the worlds seventh largest mobile operator, with operations in Europe and Asia, including a100 % subsidiary in Pakistan.