CLB halts Uninor assets auction

Norwegian telco Uninor’s tale of woe isn’t ending anytime soon. On Thursday, the Company Law Board (CLB) stalled its proposed auction sale of assets.

In an order, the CLB chairman DR Deshmukh stopped Uninor from taking “any steps whatsoever  in pursuance to the auction notice published on August 1 or similar notices that may have been published.”

That’s a bodyblow to Uninor, which is looking at auctioning its assets in India to gain some return on investment, before termination of its licence on September 7.

In a statement to the media, Uninor said, “Since the CLB order has now been pronounced, we are able to comprehensively move our arguments towards Uninor’s assets auctions to the higher courts. As we have said earlier, Uninor will pursue every legal measure available that gives its employees, customers and business partners a chance to continue beyond the license cancellation date. Meanwhile, Uninor’s operations continue as before as this process has no impact on them.”

Uninor is a joint venture between Norway’s Telenor, which holds a majority 67.25% stake and India’s realty major Unitech, which holds a 32.75% stake.

On Wednesday, the CLB had reserved its decision on the auction sale, following a contempt of court notice filed against Uninor by Unitech.

On August 1, Uninor literally put its company on sale, when it invited bids from interested buyers till August 6, as part of a proposed auction of all its telecom assets on August 8. Uninor’s management believed this to be the only way to get some return on its investment in India, which would help to pay off its creditors.

While Uninor’s minimum asking price for bids was pegged at Rs4,000 crore, Telenor agreed to pay Rs4,190 crore and buy out Uninor, in case there were no higher bidders. Telenor has invested around Rs14,000 crore in the telecom sector through its majority stakeholding in Uninor and has around 30 million customers till date. Post the cancellation of licenses, its plan was to find a new partner and re-bid to win back its spectrum and start afresh in the telecom sector under a new brand name.

However, Telenor’s estranged partner Unitech called the auction sale ‘illegal’ and a premeditated move on the part of Telenor and appealed to CLB to stop the auction sale.

However, an ever-determined Uninor then appealed to a higher court (Delhi High Court) which overruled the CLB’s stay on Uninor’s auction proceedings, giving the go-ahead for the same. Unitech then slapped a contempt of court notice against Uninor with the CLB, which finally ruled in Unitech’s favour, opposing the auction.

As per sources, Uninor may now move the High Court once more against the CLB order next week. The question is, do they have a favourable business case?

Ramesh K Vaidyanathan, partner, Advaya Legal, a law firm, said the real test for the court will be to gauge the impact of the auction proceedings on the minority stakeholder (Unitech) and other shareholders.

“Telenor will argue that it is protecting the value of the company (Uninor) by participating in the action process and trying to trip the company assets so that all is not lost due to liquidation. However, in case Telenor wins the auction, it may gain after consideration being paid for the assets to the creditors and taxes, since it is the majority stakeholder,” he said.

“This would be unfair to Unitech. In my view, the high court may go with CLB’s order and disallow the auction. While this will be detrimental to both equity partners, a better solution would be to hold a more transparent auction, which would ensure sufficient valuation to Unitech as well. Else Telenor can give Unitech an equity stake in its new venture, which sufficiently compensates for Unitech’s losses due to closure of the joint venture.”

However, Telenor has clearly stated time and again its intention to end ties completely with Unitech, and have no further association with the company.

Uninor is among the eight telecom operators whose 2G licences were cancelled as per a Supreme Court Order to that effect. However, it was given time till September 7 to continue operations in India and participate in another 2G auction scheduled for August 31 to win back its licences. However, after September 7, it would be forced to exit the sector.