Estranged partners of Unitech Wireless- Norwegian telco Telenor and Unitech group smoked the peace pipe today, with the real estate major agreeing to sell its 33.75% stake in the Indian telecom company for an undisclosed amount.
The eighteen months long battle between the two partners was intertwined with high drama which included the imprisonment of Sanjay Chandra the key promoter who was instrumental in bringing the real estate group into telecom in the 2G scam, various court cases, arbitration proceedings, cancellation of the company’s licence in the Supreme court, and Telenor setting up a separate company to bid for the forthcoming auctions with a new partner ignoring their current partners.
In a press statement today Unitech also added that as part of the agreement “Unitech will continue to retain economic rights associated with its current shareholding in Unitech Wireless” which include any refunds that the company might get.
These include a possible refund of the Rs 1658 crore that the company paid for a pan India 2G licence (the empowered group of ministers on telecom has agreed to it) which was cancelled , some tax refunds due to transfer of assets to Telenor’s new company which will bid for the upcoming 2G auction and any financial gain which might accrue from Telenor’s appeal under the BIPA for compensation because of its Indian licence getting cancelled.
Telenor also in a press statement added that with immediate effect, Unitech Limited nominees will withdraw from the Uninor Board and all special shareholder rights shall stand suspended. Subsequent to a successful business transfer and spectrum auction, all disputes and claims between the parties shall stand withdrawn.
Unitech had invested around Rs 650 crore in the joint venture which has over 41 million subscribers and operates in 13 circles even though it has made it clear that it will prune it operations only in nine circles. So analysts say it is obvious that it will get much more than it has spent. However it could also get an additional bonanza - about Rs 560 crore as its share of the refund of the licence fee if cleared by the cabinet and also tax refunds on transfer of depreciated assets.
Unitech had valued the company at Rs 12,000 crore before it lost its licence. However Telenor on the other had valued the company at only Rs 400 crore which was not acceptable by their partners.
Telenor however will bid for the upcoming auction through the new company, to which the assets and the subscribers would be transferred from Unitech Wireless as part of the understanding. It is also scouting for a new Indian partner as is mandatory under the FDI policy where telcos must have up to 26% domestic stake.
Uninor had in August 1 put the assets as well as the subscribers on the block for potential bidders and had said that their majority owner Telenor was willing to pay Rs 4,190 crore for its customers and assets in case no other bidder turns up.
Unitech however appealed and stayed the sale in the Company Law Board (CLB). However the Delhi high court gave Telenor some relief allowing them to seek applications from interested parties, even as the CLB heard the case.
However based on these valuations of assets and including the money the new company has to fork out for auction in nine circles, analysts say it could have to fork out over Rs 6,000 crore. If all this money is bought through equity the Indian partner has to for out over Rs 1,560 crore for his 26% stake. However Telenor has already applied to the government for raising up to Rs 4,163 crore through external commercial borrowings (ECBs) for finance 2G auction as well as operations but has asked for a one time relaxation of the rules.
In order to clean the slate Telenor has already settled the loan outstanding of Rs 9,809 crore on the books of Unitech Wireless just a few months ago after banks refused to give an extension of some of them. It will also of course take over the losses which were around Rs 620 crore in April-June quarter of this financial year. The Norwegein company also made an attempt to raise money through a Rs 1,200 crore rights issue but the partners opposed it in the board meeting leading to another face off.