Unitech, Telenor spat fails to abate

The war of words between Unitech and its telecom partner, Telenor of Norway, went further today, with officials of the former questioning the latter’s motive in insisting on a rights issue of up to Rs 8,200 crore.

“Why are they so keen on a rights issue now, when the company is already well funded? Its clear they want to hike their stake at a time when the valuation is low,” said a senior Unitech official, on condition of anonymity.

Telenor and Unitech have a joint venture in in India, Uninor, where the Norwegian telco holds 67.25 per cent. Unitech has alredy gone to court to try and stop the proposed rights issue. The next hearing is this Saturday. Last week, Telenor had offered arbitration as a way out. Unitech is yet to accept the proposal.

Unitech officials alleged today the real issue had been couched under the garb of financing requirements. “We have a clearance from our lenders for Rs 5,800 crore of short-term debt. Out of that, only Rs 4,500 crore has been drawn down. Telenor is trying to make Uninor a debt-free company, something unheard of anywhere in the world,” these officials added. The short-term debt has been syndicated by a clutch of foreign banks like JP Morgan, Barclays, ING and Citi.

The officials said Telenor had always opposed its move to raise debt for the venture and cite an example of its opposition to a Rs 9,000-crore credit line that was apparently offered by State Bank of India.

Sources close to Telenor denied these allegations. In the current environment, they said, raising equity is easier and cheaper than debt. Moreover, they said, the Unitech management was aware of its rights issue plan as early as January.

Unitech, however, said they strongly dissented against the rights issue option when it came up for discussion on January 15. “Our opposition is from Day 1. Our strong dissent has also been recorded. From Day 1, we have been telling them that we will oppose them hard. So, where is the delay in showing dissent?” they asked.

Meanwhile, the management of Uninor assured employees the differences between the two owner-partners was related to long-term funding for the company and there were enough funds to run operations, currently and in the immediate future.

In an internal mail, the managing director, Sigve Brekke, said, “The disagreement between our two shareholders is just on the route to secure long-term funding for Uninor. On such matters, it is not uncommon that shareholders will take precautionary measures to maintain their legal rights, while they discuss with each other to reach a resolution.”

He said both shareholders were committed to Uninor for the long term and would continue to discuss with each other to reach a decision that best served Uninor’s long-term interests. He said the ongoing dispute would not affect Uninor’s operations in any manner.

Uninor has been unable to secure loans for the its expansion, since the company has figured in the ongoing Central Bureau of Investigation inquiry into the 2G spectrum case. Also, the Comptroller and Auditor General had said the Unitech Group had supressed information and was not eligible to get a mobile telephony licence. The case for cancellation of all 85 licences mentioned in the CAG report, including that of Unitech’s, is under consideration of the department of telecommunications.