An attempt by Norwegian telecoms firm Telenor to cash in on a potentially huge market for mobile phone service in India has backfired badly. Now Telenor is once again turning to its biggest shareholder, the state, for help after getting in trouble on foreign investments.
Opposition politicians claim Telenor’s investment in India may turn out to be one of the biggest scandals any Norwegian company has been involved in abroad. On Friday, the company announced it was taking a stunning NOK 4.2 billion in write-downs tied to its joint venture company Uninor, formed through its purchase of a 60 percent stake in Indian firm Unitech Wireless four years ago.
Since then, Telenor’s effort to profit on tens of millions of new mobile phone customers has met ongoing static. The company had a hard time securing the market share it sought. Then, just a year after the formation of Uninor in 2009, Telenor’s Indian partner Unitech became a target of corruption charges that came to a head last week when India’s supreme court withdrew the licenses initially granted to Unitech that allow Uninor to do business.
That means Telenor /Uninor may need to go through a new bidding round in order to keep their roughly 36 million customers, at huge cost. “The situation is extremely unclear for Telenor,” telecoms analyst Tore Tønseth told news bureau NTB.
Telenor officials have asked for help from the same government minister, Trond Giske, with whom they landed in conflict just a few weeks ago over the sale of TV2. Telenor chairman Harald Norvik reportedly has also admitted that Telenor was aware of corruption allegations against its Indian partner back in 2008.
Prime Minister Jens Stoltenberg already wrote to his Indian counterpart last year, asking that Telenor be treated fairly as the corruption case moved forward. Now India’s highest court has ruled against Telenor/Uninor and a host of other companies, part of an anti-corruption campaign that Norwegian officials would be hard-pressed to criticize.
A wide range of commentators and opposition politicians are calling on Norway’s Labour-led government coalition to be very careful about helping Telenor when corruption is involved. They claim Telenor must have known it was taking a huge risk investing so heavily in India, and now must pay the price. Officials of both the Conservative Party and the Progress Party are calling for an investigation into just what Telenor knew about how Unitech acquired its licenses, and what Telenor has told its biggest owner, the state in the form of Giske.
Newspaper Aftenposten reported over the weekend that both Norvik, who has long ties to Labour, and Telenor chief executive Jon Fredrik Baksaas will likely hang on to their jobs since the company “needs some peace” to tackle the trouble in India. Baksaas has also survived other major problems after his expansive moves into Russia, Bangladesh and Hungary.
What’s most important now, say analysts and government officials, is to secure Telenor assets in India and cut losses. Giske told newspaper Dagsavisen that the Norwegian government has great respect for the Indian court system and won’t get involved in the legal withdrawal of the licenses “at all.” Telenor must deal with the consequences of the court ruling. Giske noted, however, that since Telenor has invested billions in the Indian market, the government may involve itself in the political aspects of a new licensing round.
Giske told TV2 that the state’s confidence in Telenor’s management and board of directors, meanwhile, will be evaluated “after things have settled down.”
Views and News from Norway/Nina Berglund
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