A full-blown tussle has broken out between Unitech Wireless and Telenor Asia Pte over how the expansion of Uninor should be funded.
A full-blown tussle has broken out between Unitech Wireless and Telenor Asia Pte over how the expansion of Uninor, their joint venture, should be funded.
After dragging its Norwegian partner to the Supreme Court on the issue, Unitech has now filed a petition in the Company Law Board (CLB) accusing Telenor of mismanaging Uninor’s business in a bid to erode the telecom venture’s value and sinking its rate of returns in the negative zone of -11%.
In its petition, Unitech has accused Telenor of obstructing its plans “to obtain project finance for the company, and pushing a disastrous business plan for the company.”
Differences between the two partners came to the fore when the Uninor board approved a proposal of a $1.7-billion rights issue earlier this year. Unitech vehemently opposed the plan and approached the Supreme Court to restrain the company from raising funds through this route.
Telenor said it was forced to take the rights issue route as bank loans were not easily available.
Unitech’s petition, filed on Tuesday, refuted this claim saying in November last year, Telenor, in its capacity as a majority shareholder in the JV, had declined to accept a long-term debt of `9,000 crore from the State Bank of India even when it was available.
Telenor holds 67.25% stake in Uninor, while Unitech Ltd through its associate companies holds 32.75%.
“Having failed to obtain project finance, Telenor and its executives are seeking to cause the company to make a rights issue in direct violation of the hierarchy of funding incorporated in its Articles of Association. Pertinent to note here is that Memorandum of Articles of Uninor provides that the company should exhaust all others modes of available funding prior to undertaking rights offer process,” Unitech said in its petition.
The second-largest real estate firm alleged Telenor was thrusting a rights issue down the company’s throat even when it “does not need the funds.”
Unitech has also accused Telenor and its key executives of approving and adopting a 10-year plan, which it termed as “outright unilateral, mala fide, self-serving, premature and aimed at artificially depressing the valuation of the company.”
It also raised concerns over the corporate governance norms being followed by Telenor, which, it said, “directly impedes on well laid down procedures and protocols of Unitech Wireless mutually agreed upon by both the partners.”
Reacting to Unitech’s allegations, Glenn Mandelid, director of communications, Telenor Group region Asia, said; “There was an unsuccessful attempt earlier to block the rights issue through a legal process that went up to the Supreme Court of India. As we have done earlier, we will present the facts in this new legal initiative taken by Unitech Ltd.”
Mandelid said the rights issue was a simple case of the Uninor board having followed prescribed processes and asking its owners to invest more in the company in the absence of bank loans.
“We continue to urge Unitech Ltd to join us in meeting this shared responsibility towards the company. Valuations, being a part of the rights issue process, are legally confidential between the owners and we would like to maintain that confidentiality on our part,” Mandelid told DNA.
He dismissed reports about Unitech buying out Telenor stake and the Norwegian company looking to exit the Indian market. “Uninor has already emerged as the most successful new operator in India by far and Telenor Group will not allow any of this to disrupt its continued progress,” he said.
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