Telenor faces legal marathon in India

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Norwegian telecoms giant Telenor has opted to file a huge compensation claim against its partner in India, Unitech, after their joint venture Uninor lost the mobile phone licenses needed to conduct business. Telenor blames the license loss on Unitech, which is responding with a counter claim.

Telenor's attempt to cash in on the mobile phone market in India is resulting in a legal quagmire and huge potential losses. PHOTO: Telenor

It all means that Telenor faces a long and complicated legal battle in India, and is cutting all ties to Unitech Group. Their partnership, declared a Telenor spokesman, “has no future.”

Telenor now is most anxious to stem huge potential losses on its Indian venture, launched four years ago in a move to get into the mobile phone business in the huge, populous country. Telenor invested NOK 8.9 billion in Uninor and guaranteed loans for NOK 8.1 billion, meaning it has NOK 17 billion at stake in a venture that now has little value.

That’s because its partner Unitech became embroiled in an alleged corruption scandal that culminated earlier this month when India’s highest court cancelled 122 licenses that had been granted to eight companies including Uninor.

“We believe the loss of the licenses amounts to a violation of the shareholder agreement between Telenor and Unitech,” Pål Kvalheim, communications director for Telenor, told newspaper Dagens Næringsliv (DN) on Thursday. “When the company no longer has licenses, Unitech by definition has not delivered on the guarantees it made.”

Unitech, meanwhile, claimed it was “surprised” by Telenor’s announced intention to sue for full recovery of its NOK 17 billion. “This is a clear violation of confidentiality declarations in the shareholder agreement,” wrote Unitech’s representative on the Uninor board, Nirjar Goel, in an e-mail cited by DN. Goel said Telenor should instead sue the Indian authorities who yanked the licenses, claiming that the high court did not conclude that any of the eight companies losing licenses did anything illegal. Unitech also now plans to countersue Telenor, for alleged violation of confidentiality clauses, reported DN.

Telenor is looking for a new partner in India, while analysts in Norway worry that even if Telenor prevails in its claim against its former partenr, Unitech may not have the means to pay. Telenor owned 67 percent of its ill-fated venture with Unitech, which held the remainder. Since the Norwegian government still holds a major stake in Telenor, some politicians in Norway have described Telenor’s trouble in India as one of the biggest scandals any Norwegian company has been involved in abroad.

Views and News from Norway/Nina Berglund

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