In an interaction with FE at its global headquarters in Oslo, a day after its annual capital markets day, Telenor global CEO Jon Fredrik Baksaas said that if Unitech does not participate in the rights issue, then the question of looking for a new partner in India emerges.
The statement assumes significance because Telenor and Unitech have sharply differed over raising funds for Uninor's expansion through a rights issue. Though the Uninor board had cleared the rights issue proposal, Unitech had obtained a stay order from a local court in Gurgaon. However, with the Punjab and Haryana High Court recently lifting the stay, decks are clear for the rights issue.
Said Baksaas: Every partner needs to participate in the rights issue. Unitech needs to participate as it needs to realise its obligations to the company. Currently, Telenor is the guarantor for the all the companys debt and, therefore, the burden on Telenors shoulders is larger. It is Unitechs obligation to finance the company through the rights issue as per agreements.
Telenor has so far invested more than R11,000 crore in the company. It acquired a 67.25% stake in October 2008 for around R6,120 crore and later invested another R5,000 crore for expansion and rollout of networks. The companys peak funding stands at R15,000 crore and Telenor has stood guarantor for the debt Uninor has raised. However, it no longer wants to raise debt but fund growth through equity.
Since India's regulations permit foreign investors to hold only up to 74% in any telecom service operations, if Unitech does not participate in the issue and subscribe to its share of equity, then Telenor will have to look for another Indian partner.
This is not the first time Telenor and Unitech have differed over running Uninor. With the unfolding of the 2G spectrum scam and the arrest of Unitechs managing director Sanjay Chandra in connection with its investigation, Telenor had asked him to step down as the chairman of Uninor. Chandra resisted initially, but resigned later.
Uninor is among nine companies that were awarded licences by former telecom minister A Raja in January 2008, which is now being investigated by the CBI in what is known as 2G spectrum scam.
The company has licences for 22 circles but so far has rolled out services in 13 circles and has a subscriber base of around 27 million.
Baksaas also defended Telenors role in the 2G spectrum scam. We invested in a company which had licences, which then had approval from the regulatory authorities. We are very clear about our role. We invested in a company and rolled out services. We were never part of acquiring the licence and had no role in it.
Does he regret entering India considering the regulatory mess his company has walked into Baksaas doesnt feel so. As he says, If you do telecoms business globally, then theres no such thing as a red carpet.
How does he plan to fight the 2G stigma attached to Telenor We will present our viewpoint. If we remain silent, then it will not be good. We have a solid, robust case to present that we have been present in Asia for 15 years and are long-term by nature.
(Travel for this story was sponsored by Telenor)