Unitech moves CLB against telecom JV's asset auction

Unitech today filed a petition with the Company Law Board, asking it to pass an order restraining a possible auctioning or any other sale or transfer of assets of Unitech Wireless, its telecom joint venture with Norwegian giant Telenor. The petition comes close on the heels of a decision taken by the Unitech Wireless board to auction its assets with a fixed base price of Rs 4,000 crore. Unitech is the minority partner in the joint venture, while Telenor owns 67 per cent stake.

“Transfer by way of auction is only a feeble attempt to malafidely colour the process of transfer of assets of Uninor as fair (though the fact remains that it is unfair, malafide and oppressive),” Unitech said in its petition.

Unitech also pointed out asset transfer could not be made without a nod from the Department of Telecommunications. “It defies logic as to how any transfer of assets can take place in the absence of the DoT approval for transfer of licences which is the sine qua non of operation of those assets,” it said.

Unitech also challenged the board’s decision to auction the company with the brand name, ‘Uninor’, which is an amalgamation of two established brands — Unitech and Telenor. “Simply because Telenor does not want to partner with Unitech cannot be a reason for Unitech to allow the brand name to be sold away,” Unitech said.

Telenor and Unitech have been sparring with each other since the 2G scam broke out, implicating the latter's role in obtaining the licence. Sanjay Chandra, managing director of Unitech, was also arrested by the Central Bureau of Investigation (CBI), and was later released. An attempt by Telenor to go for a rights issue, earlier, was also blocked by Unitech.

The company also accused Telenor of wishing to “scuttle and deprive” Unitech of the opportunity to participate in the fresh licensing process. “Telenor wants to auction the assets of Uninor because it does not want to participate in the process of fresh allocation of spectrum through the existing joint venture company Uninor in which the petitioners (Unitech) are its partners. This is on the ground that there are legacy issues with the petitioners. This is clearly irrational and opposed to the principles underlying the joint venture,” the company said.

The decision to go ahead with the auction is “premature”, until the rules of the fresh licensing processes are finalised by the government, Unitech said. “It is not feasible at all and comes with a fait accompli, namely that there will be no participant other than Telenor.”

The minority partner also said the proposed auction was an eyewash, and was borne out of the fact that the potential buyer was expected to conduct its due diligence in a period of two days. “Clearly, Telenor alone with its management control is in a position to achieve this feat,” Unitech said.

The valuation done by the respondents for the proposed auction is clearly not on a going concern principle, nor is at a fair valuation of the business.