Telenor plans to increase stake in Unitech Wireless to 74%

NEW DELHI: Norway's Telenor has told the Foreign Investment Promotion Board that it plans to increase its holdings in Unitech Wireless to 74% and induct other 'resident Indian shareholders' if its JV partner failed to subscribe to the Rs 8,250 crore rights issue.

Telenor has a majority stake of 67.25% in Unitech Wireless, which offers mobile services in India under the 'Uninor' brand. Realty firm Unitech owns the rest. This marks the fist instance of Telenor officially stating that it plans to increase its holdings in Unitech Wireless.

Both partners are involved in a bitter spat over the last couple of months as Unitech has opposed the rights issue.
Earlier this month, the foreign investment promotion board, the apex government body that approves all major investments from abroad, has cleared a proposal from Unitech Wireless' for a rights issue of Rs 8,250 crore.

The FIPB had cleared the proposal despite both the telecoms and home ministries seeking that it be deferred and the revenue department opposing the rights issue on the grounds of 'treaty shopping' according to internal documents of the board reviewed by ET.

While the home ministry (MHA) had raised concerns about Telenor's holding in Pakistan, the telecoms department had wanted it to deferred as Unitech Wireless was yet to get its approval for merging all its eight subsidiaries into a single entity.

When clearing the proposal, the FIPB said that revenue department's objections were generic in nature and could be overruled. It also said that no separate security clearance was required from the home ministry for the rights issue. The FIPB also asked the telecoms and home ministries to place their concerns, if any, before the Cabinet Committee of Economic Affairs (CCEA) when the apex body considers the rights issue. All proposals where the inflow exceeds Rs 1200 crore has to be cleared by the CCEA.

In September, Telenor's group CEO Fredrik Baksaas had told ET that it would look at inducting another partner for its Indian operations if Unitech 'does not meet its obligations and participate in the rights issue'.

Last month, the Unitech group had dragged its JV partner to the company law board (CLB) citing 'gross mismanagement' by the Norwegian telco, marking a new low in the deteriorating relations between both partners, who are also involved in an arbitration process in Singapore.

Unitech had also offered to buy out Telenor's 67.25% stake in their JV for Rs 269 crore, escalating hostilities between the two. The offer was made in their petition before the CLB which it accused Telenor and its executives of 'oppressive and mala-fide actions'.

When contacted the Uninor spokesperson said the company 'has asked for approval to bring in more FDI from Telenor Group into India to secure its long-term funding'. "Through a rigorous process that lasted several months, the FIPB and CCEA have earlier already scrutinized every aspect of Telenor Group's investment into India and then approved it. Since we are not privy to any internal processes of the FIPB, we are unable to respond specifically at this time," the spokesperson added.