Telecom tangle : Telenor v. Unitech

The fight between Norway-based telecom major Telenor and its domestic partner Unitech Ltd is going to flare up as Telenor announced its intention to form a new entity in India to continue its operation. It said the new company will participate in the auctions of fresh licences as mandated by the Supreme Court. However, a senior official in Unitech clarified that such a move by Telenor is not tenable as it requires “no objection” from them as per the bilateral agreement between the two companies to form the JV company Uninor. “In our view this action of Telenor is nothing but an attempt to circumvent the non-compete provisions of the agreement,” Unitech said in a statement. Telenor countered the Unitech’s view, saying that considering the fraud and misrepresentation on the part of Unitech, as established by the Supreme Court judgment, Telenor can unilaterally declare the shareholder agreement void. So, shelter of the bilateral agreement can not be taken. Unitech argued that the Supreme Court has cancelled all the UAS (universal access services) licences and spectrum granted on and after January 10, 2008, while questioning the government policy. “Unitech cannot be held responsible for this in any manner,” it said. Telenor said all the existing business in the Uninor will be transferred to the new company at a fair market value. It expected that Uninor board will give approval towards this end. However, Unitech has no such intention. Terming such a move an “oppression to minority shareholders”, Unitech said, “Telenor cannot transfer any assets of Uninor without the consent of Unitech because we have veto right in the shareholders’ agreement as well as in the articles of association for such matters.’’ Unitech holds 33% and Telenor 67% stake in the JV. To secure approval of transfer of business, Telenor will require a minimum of 75% votes. However, Telenor clarified that the 75% votes of shareholders are not needed since Uninor is a private company. But, Unitech is ready to challenge the Telenor’s contention in the court. Unitech said the company will take all possible legal measures to protect its investments and rights under the shareholders’ agreement. As legal battle is a time consuming process, it will frustrate Telenor’s effort to participate in the auction of spectrum, which is scheduled to take place in the next four months as directed by the apex court.