Telenor Sticks to India Unit Targets After Corruption Scandal

Telenor ASA, the Nordic region’s largest phone company, said it’s maintaining targets for its Indian unit Uninor, which is challenged by a corruption probe and an “unclear” regulatory environment.

The Indian government ordered Uninor and Emirates Telecommunications Corp. to prove the validity of their mobile-phone licenses, saying they were obtained in 2008 under false pretences. Uninor also paid a fine to India’s Department of Telecommunications for not meeting rollout obligations.

Telenor is “comfortable” with the position held in 2008 by Uninor’s predecessor, Unitech Wireless, Chief Executive Officer Jon Fredrik Baksaas said in an interview in Oslo today.

Telenor, based in Fornebu, Norway, entered India by buying a stake in Unitech Wireless, an arm of Unitech Ltd., the real estate company controlled by Indian billionaire Ramesh Chandra. Telenor began accumulating its Uninor stake in 2009 and now owns 67.25 percent. Uninor still aims to break even on the basis of earnings before interest, taxes, depreciation and amortization three years after the start of the service and gaining an eventual 8 percent market share, he said.

Telenor, which reports fourth-quarter earnings on Feb. 8, is, however, concerned about the emerging regulatory climate in the South Asian nation, he said.

“The fact that the regulatory arena for telecoms has unclear definitions or platforms is a problem longer term and needs to be resolved,” he said.


Separately, Baksaas said the Norwegian company remains skeptical about the merits of a plan by VimpelCom Ltd., in which it owns an almost 40 percent stake, to buy control of Egyptian billionaire Naguib Sawiris’s Orascom Telecom Holding SAE and Italy’s Wind Telecomunicazioni SpA.

Telenor blocked Russian affiliate VimpelCom’s bid for Sawiris’s Weather Investments SpA’s assets last month. Baksaas said concern about debt from the Wind acquisition was part of the reason the Norwegian company backed off.

“The problem was that the Italian acquisition would limit upstream cash for a number of years because of the debt load,” he said.

Telenor initially voted for the $6.5 billion transaction in October and then reversed its position in December, saying it won’t help the business or shareholders.

VimpelCom said in a statement that its board asked Chief Executive Officer Alexander Izosimov to negotiate a revised plan. Baksaas said that he couldn’t comment on a new proposal.

Dividend Flows

“I think every investor is concerned about dividend flows, so it wouldn’t be surprising that Telenor being a major shareholder in VimpelCom is looking to dividends, and that has also been part of the parameters,” Baksaas said.

Telenor’s opposition threatens to block the possible creation of the world’s fifth-largest mobile-phone company. VimpelCom, Russia’s No. 2 wireless operator, and Sawiris agreed in October to merge their assets, including a 51.7 percent stake in Egypt’s Orascom Telecom and Italian mobile operator Wind.

The proposed transaction would have made it necessary to adjust a shareholder agreement between Telenor and VimpelCom’s other major shareholder, Altimo, as both companies were asked to relinquish the right to veto the creation of new shares. Telenor didn’t want to change the shareholder agreement, investor relations chief Marianne Moe said on Dec. 21.

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