Telenor to drop partner Unitech after 2G scandal


12 Jan 2012
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Telenor to drop partner Unitech after 2G scandal


(Reuters) - Telenor (TEL.OL) wants to drop its Indian joint-venture partner Unitech (UNTE.NS) after the Supreme Court revoked their mobile licences in the country and is seeking a new local partner, the Norwegian telecoms firm said on Wednesday.

Telenor said it would seek indemnity and compensation from Unitech.

"It is Telenor Group's position that the strategic partnership with Unitech does not have a future, and it therefore will start the process of looking for a new Indian partner," it said in a statement.

Unitech replied by threatening counter legal action.

India's Supreme Court ordered earlier this month telecoms licences issued under a scandal-tainted 2008 sale be revoked, among them those of Uninor, owned by Unitech and Telenor.

Telenor has denied any responsibility in the multi-billion dollar scandal, and that any potential wrongdoing took place before it bought its licences from Unitech in 2008.

The wrangle is the latest issue over which Unitech and Telenor have been at odds.

The partners have also been at loggerheads over a planned $1.7 billion rights issue in the Uninor joint venture.


Separately, Telenor wrestled back partial control of telecom firm Vimpelcom (VIP.N) from Russian oligarch Mikhail Fridman's Alfa Group in a move that gives it more say over strategy and could prolong a long-running corporate battle.

The company said it has bought 234 million shares in Vimpelcom that will boost its voting share to 36.36 percent from 25 percent, meaning it no longer needs to go ahead with court proceedings against old adversary and fellow shareholder Altimo, a unit of Alfa Group.

Telenor, which paid $374.4 million for the preferred shares in Vimpelcom from Egyptian tycoon Naguib Sawiris' Weather Investments, will boost its share of voting rights back near its original 36 percent, which had been diluted to 25 percent by Vimpelcom's transactions with Sawiris.

"It is not a case of outmanoeuvring anyone, but getting us back in the ownership position we had before the transaction," Telenor spokesman Dag Melgaard told Reuters.

Telenor had opposed Vimpelcom's purchase last year of a majority stake in Egypt's Orascom and Italy's Wind from Sawiris, saying the acquisition would saddle the group with too much debt and distract it from recouping market share in Russia while unfairly depriving Telenor of some control.

A shareholder agreement between Altimo and Telenor had given Telenor pre-emptive rights to maintain voting control in the event of a shift in ownership structure, but Altimo tried to cancel the agreement in a share-sale manoeuvre that Telenor said was underhanded.

Altimo had pushed for Sawiris's deal and faced off against Telenor in the arbitration, which extended a fierce battle over Vimpelcom's corporate strategy dating back to late in the last decade.

The conflict came to typify the difficulties faced by overseas investors in Russia's oligarch-controlled business world.

"We received the Telenor statement two hours ago. We were not a party to this agreement and are not prepared to comment in detail as we are carefully examining the question, first of all, from a legal point of view," Altimo spokesman Yevgeny Dumalkin told Reuters.


The new deal sees Telenor overcome Altimo in terms of voting rights, when minority shareholders are taken into account, presenting it with far greater influence in Vimpelcom's future strategy.

In future decisions, were minority shareholders to join Telenor's position, they would together hold more than 50 percent of Vimpelcom's shares and overrule Altimo - which was not the case previously.

"Minority shareholders' vote may now be deciding when it comes to voting on strategic issues, and Altimo and Sawiris will not be able to have full control over the company's strategy," said Viktor Klimovich, an analyst at VTB Capital adding this meant Vimpelcom's strategy may now become "more balanced".

Peder Strand, an analyst at SEB Enskilda, said the alternative for Telenor would be to "fight it out in arbitration" and then regain its original voting power at a cost of between $2-3 billion by buying more expensive, ordinary shares.

"That would be a scenario that I think many shareholders would not be very keen to see. It would increase Telenor's exposure much more in an asset they clearly have had difficulties with," he said.

The news was received positively with shares in Telenor rising 3.2 percent on Wednesday, while Vimpelcom's rose 4.8 percent.

"There has been a significant threat that they would have to spend substantial amounts to protect their voting rights and now they strike a deal, so it is positive," said Carnegie analyst Espen Torgersen.

Another analyst struck a note of caution, however.

"We still have a situation in which none of these strategic shareholders control the company," said Tibor Bokor, a London-based telecoms analyst at ING.

"There is some rebalancing towards Telenor and from the minorities shareholders' point of view ... (but ) it does not mean that Telenor is getting control of the company - not yet."

Source - Reuters
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