Telenor to get 7% more in Unitech arm at no extra cost

NEW DELHI: Cash-strapped realtor Unitech has agreed to give away an additional 7.25% stake in its mobile phone business to Norway���s Telenor at no additional cost, in return for not having to pump in more funds into the venture and higher repayment of debt.

The companies confirmed the deal that will increase Telenor���s stake in Unitech Wireless to 67.25% on Tuesday, but did not give reasons. However, a person familiar with the transaction said the deal would spare Unitech the need to invest more capital for the next two years and allow it to improve its battered cash flows, as it gets back a higher proportion of the money it has lent to the venture.

Telenor, which bought a 60% stake in Unitech Wireless last October for Rs 6,120 crore, will get the additional stake in the form of new shares in the venture. The new deal brings down the enterprise value of Unitech Wireless to about Rs 9,100 crore, from Rs 10,200 crore earlier. Telenor, Norway���s top telecom company, will bear all expenses of rolling out mobile networks across the country, giving Unitech freedom to focus on its core business that has been severely hit by a downturn in the real estate market.




Deal to help Telenor get foothold here

Unitech���s eight telecom subsidiaries, together referred to as Unitech Wireless, have the necessary licences to launch services in 22 markets across India and the wireless spectrum critical for a launch, but are yet to start services.

The deal between Unitech and Telenor is likely to be closed in the next few days, following which Unitech Wireless will receive the first tranche of Rs 1,250 crore from Telenor, a Unitech spokesman said. Upon completion of the first phase of funding, Telenor will have a 33.5% stake in the company.

The four-tranche transaction, which will eventually take Telenor���s stake to 67.25%, is expected to be completed by the year-end. Unitech has lent around Rs 900 crore to its wireless arm, of which it will be able to get back Rs 380 crore once the first tranche of funding from Telenor comes in, up from Rs 300 crore under the previous deal. The greater refund will be used by Unitech, which has Rs 10,000 crore debt on its balance sheet, including Rs 2,000 crore of debt on account of its telecom venture, to reduce its debt pile.

The deal will enable Telenor, one of Europe���s major telecom groups, to gain a presence in the Indian mobile market, which is the world���s fastest-growing. Telenor, which has about 65 million subscribers in Asia, is the fourth-largest global player in this region after SingTel, NTT DoCoMo and Vodafone.

In Asia, it has operations in Bangladesh, Pakistan, Malaysia and Thailand. Telenor���s deal with Unitech is still awaiting regulatory approvals, principally because of the Norwegian group���s operations in Pakistan and Bangladesh. Companies operating in these two countries have previously faced problems securing security clearances to operate in India.