Unitech opposes Telenor's rights issue proposal
The battle between the estranged partners of Unitech Wireless — Telenor and Unitech — has resurfaced, with the Indian real estate giant opposing the Norwegian telecom firm’s Rs 1,200-crore rights issue proposal. In a letter to the Foreign Investment Promotion Board (FIPB) on Tuesday, Unitech has also accused its partner of misinterpreting facts discussed in the joint venture company’s board meetings.
Unitech has also raised questions as to how Telenor would bring in Rs 1,200 crore through a rights issue without breaching the 74 per cent FDI cap in the sector, as the real estate giant has already informed it would not subscribe to the issue.
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The move comes a few days before the FIPB would consider the proposal of Uninor to raise Rs 1,200 crore through a rights issue to finance future investments in the country. Telenor holds 67 per cent equity stake in Unitech Wireless, the company that operates 2G services under the Uninor brand name, while the remaining is held by Unitech.
In its letter to the FIPB, Unitech has said that in its application Uninor had stated the nominee directors appointed by Unitech Ltd on the company’s board had consented to the rights offer in a board meeting on May 23. That, Unitech says, is wrong and a misinterpretation of facts, as the nominee directors had already written to Uninor, pointing out the issue of the rights issue was not even on the agenda in the May 23 meeting. It argues there was only some discussion on the rights issue but no decision was taken, as the matter was under arbitration between the two stakeholders.
Unitech says the reason for the arbitration was that Telenor breached the hierarchy of funding, under which project finance funding would come first and was available through State Bank of India and funding by a rights issue would be an option. It says Telenor did not take the option of getting the expansion funded through financing from State Bank of India.
“It is unfortunate to note the misrepresentations being made with reference to the FIPB process initiated by Uninor. With the relevant authorities, Uninor will meet these distortions point by point, with facts. Telenor Group remains committed towards its operations in India and will continue to pursue every measure available to safeguard their future," Telenor said in a statement.
Unitech has also raised questions on the company’s Managing Director Sigve Brekke in separate communications and in the board, saying his request for a security clearance (a mandatory condition for FIPB endorsement) is tantamount to a breach in conditions, as he still heads the operation. It has raised a question if there is an overlap in Brekke’s role as part of the Telenor top management in India and Pakistan, which is not allowed under FIPB conditions. A Telenor spokesperson, however, said, “Mr Brekke has never been employed in Telenor Pakistan. He held a non-executive position on the board of that company, from which too he resigned a full year before taking up the Uninor MD’s position." The spokesperson added Brekke had applied for extension of his security clearance well in advance and procedural delays in such an extension were not uncommon.