In a yet another salvo against its embittered Indian partner, the Unitech Group, Norway-headquartered Telenor on Tuesday announced it is setting up a new company for its telecom business in India with a 74 per cent stake, which will participate in the upcoming 2G spectrum auction. It also plans to go to the Foreign Investment Promotion Board for necessary permissions.
It also issued a notice to the Unitech Group for voidance of the current shareholders’ pact with Unitech on account of fraud and misrepresentation on their part as established by the Supreme Court judgment, the company said in a statement. It said this voidance will take place with a prospective affect and all rights that have accrued in the past shall consequently stand preserved. Telenor had signed a JV with Unitech in 2009 and currently holds 67.25 per cent stake and offer services under Uninor brand in 13 circles. It had licences to offer pan-India services.
“In order to ensure a smooth transition for Uninor’s employees, customers and stakeholders, we expect that the Uninor Board would, with prior consent from the Indian authorities, transfer Uninor’s business into this new company at a fair market value,” it added. Till then, Uninor operations will continue as before.
However, responding to Telenor's challenge on the JV, Unitech in a statement said, “The shareholders’ agreement cannot be terminated by any party unilaterally. Telenor has again erroneously taken a plea of the order passed by the SC for terminating the shareholders’ agreement. In our view, this action of Telenor is nothing but an attempt to circumvent the non-compete provisions of the agreement, pointed out earlier.”
Unitech added it is shocking that Telenor intends to transfer the entire business to a new affiliated entity owned by itself. It said it not only shows complete disregard and oppression of the minority shareholder by Telenor, but is also against all principles of related party transactions.
"Telenor cannot transfer any assets of Uninor without the consent of Unitech because we have veto right in the shareholders’ agreement as well as in the articles of association for such matters," the statement added.
Unitech added it will use all legal rights under the shareholders agreement and the Indian laws.
Sources close to the development say any dispute has to be first resolved through arbitration, which according to the agreement between the two JV partners will be in Singapore. Under the terms, both sides will appoint an arbitrator of their choice and the third referee will be appointed through mutual agreement. Sources say the issue could be resolved if Unitech waives the "non compete clause" in the agreement.