Telenor seeking indemnity and compensation from its Indian Partner for Loss of 2G Licenses but looking for new partner

Indian regulations allow foreign companies to hold only up to 74 percent of the equity in a mobile operator.

Norwegian mobile operator Telenor said Wednesday that it has issued a notice to its Indian joint venture partner seeking indemnity and compensation after the cancellation earlier this month of its 22 2G licenses by India's Supreme Court.

The court ordered 122 licenses issued in 2008 to be canceled, as they had been purchased by business entities that manipulated the system. Telecom Regulatory Authority of India is to auction the spectrum and licenses released as a result.

Telenor also said that it was looking for a new partner in India, indicating that it is interested in participating in the auction through a new joint venture. Indian regulations allow foreign companies to hold only up to 74 percent of the equity in a mobile operator.

The Norwegian company has a 67.25 percent stake in the joint venture, Unitech Wireless, and announced earlier this month that it had decided to write down NOK4.2 billion (US$733 million) related to the licenses and goodwill in India. After the write-down, its remaining accounting exposure after tax related to India is NOK2.4 billion as of Dec. 31, it said.

Telenor has invoked a share subscription agreement it signed with Unitech, a real-estate company, to claim the indemnity and compensation. Unitech Wireless does not hold any mobile licenses in India as a result of the cancellation.

The cancellation of 122 licenses in 22 service areas, which comes into effect in four months, will impact among others the Indian joint ventures of Etisalat, and Telenor. NTT DoCoMo's joint venture with the Tata Group will also lose licenses to operate services in a few service areas.


Tata Teleservices, NTT DoCoMo's joint venture, and Telenor, had indicated that they would seek a review of the order by the Supreme Court. 


The amount the foreign operators paid for their stakes in joint ventures was far higher than the Indian companies had earlier paid for the licenses, which were offered at basement prices in 2001, the court said in its ruling.

(C) PC World