New Delhi: Intensifying row with its minority stakeholder, Norway's Telenor-controlled Indian venture Uninor on Wednesday put on auction its entire telecom business for a minimum of Rs 4,000 crore, a move opposed strongly by Unitech.
The Nordic countries' biggest phone operator wants to scrap the joint venture with Unitech and migrate its business to a new company to seek fresh operating licences as the JV's 22 telecom permits were among the 122 quashed by the Supreme Court in February.
Telenor, which holds 67.25 per cent in Uninor, is keen to acquire the business to protect its Rs 14,000 crore investment and retain 45 million customers. It will pay Rs 4,190 crore in case no one else turns up in the auction, Unitech Wireless Pvt Ltd that operates under the Uninor brand, said in the auction notice. Unitech hold 32.75 per cent stake in Uninor. The Nordic countries' biggest phone operator wants to scrap the joint venture with Unitech and migrate its business to a new company.
"The proposed auction of Uninor assets is nothing but a circuitous way for Telenor to transfer these assets to another one of its own entities," Unitech said in a statement.
"Instead of a direct transfer an auction is being proposed to provide it a garb of legitimacy, knowing fully well that no new telco will value the assets before acquiring spectrum".
Uninor said it wants to auction the company's business, including its assets, while it is a going concern before the September 7 deadline set by the apex court for winding up of operations of all the firms whose licences had been cancelled.
"Unitech nominees had vetoed the move to auction assets in the board meeting of Uninor. Courts in India have already held that the Articles of Uninor cannot be disregarded," Unitech said in a statement indicating that the company may initiate legal action if Uninor was to go ahead with the sale.
"Whether the Shareholder's agreement can be unilaterally rescinded by Telenor is also a subject matter of arbitration between the shareholders and any decision by Telenor otherwise is prejudicing and circumventing this entire process," it said.
Uninor said auction will allow the company to generate the maximum possible returns for its creditors and secure the future of Uninor's customers, employees and business partners in the hands of new ownership.
"Telenor Asia Pte Ltd, majority shareholder of the company, has indicated its willingness to participate through an Indian affiliate entity in the auction of the business of the company," Uninor statement said.
Uninor said "an open auction will also remove any dispute around the real valuation of the Uninor business".
Valuation of Uninor has been a major bone of contention between Telenor and Unitech. Unitech is willing to exit Uninor but feels the valuation put by Telenor was a fraction of Uninor's real worth.
Unitech said the "fact that Uninor, the auctioneer and the only party to have expressed interest already are all under the direct control of the same management of Telenor, only shows that this is not a free and fair process either.
"Moreover, the entity interested in bidding being a foreign company does not seem to have requisite approvals to invest in the Telecom sector in India."
Uninor in an auction notice issued on Wednesday mentioned of the dissent of Unitech nominee director on board of the company.
"The interested bidders may note that the nominee directors in Unitech Ltd and its affiliated companies, the minority shareholders of the company, have recorded their dissent to such an auction," the notice said.
Uninor spokesperson said that the value realised from auction will be divided among stakeholders in the ratio of their shareholding pattern.
Telenor, which had accused Unitech of "fraud and misrepresentation" after the licence cancellation order, contested Unitech's claims that it had veto rights to block any asset transfer.
"We believe these are automatically forfeited once it is established that the shareholders' agreement and all rights enshrined in it, was based on fraud. We are willing to establish this in court, should the need arise," it said.
The joint venture -- Unitech Wireless (Tamilnadu) Pvt Ltd -- in a newspaper advertisement called on potential bidders to express interest in buying Uninor's business by August 6.
It set a reserve or minimum price of auction at Rs 4,000 crore "based on an independent valuation carried out by the company (Uninor) through two independent valuers, Deloitte and KPMG," the auction notice said.
Telenor is willing to participate in the auction through an Indian affiliate company, the notice said, adding that in case there is just one bidder, it would have the right to fix the bid price at a "fair market value" of Rs 4,190 crore.
"The court mandated cancellation of licence will destroy any value in the Uninor business. We do not see why any shareholder should want this value destruction to happen when it is possible to conduct an open and transparent auction of Uninor's business while Uninor is still a going concern," the Uninor statement said.
The Norwegian firm wants to continue Indian operation with the existing assets of Uninor but not ready go along with Unitech.
Telenor, in a statement on the auction of Uninor assets, said that an open auction will remove any dispute around the real valuation of the Uninor business.
"Despite adverse circumstances, it is willing to participate in this auction and procure all of Uninor's business. This will ensure that the value of Uninor s business is preserved, and not allowed to be destroyed," Telenor statement said.
It added that if Telenor is successful in the auction, it will be able to secure future for customers, employees and partners as Uninor's business will be transferred to a new company with which Telenor may approach the upcoming spectrum auctions.
Uninor spokesperson also said that auction of its asset will not have any impact on Uninor's running operations.
"The winning bidder would have the ability to continue with Uninor s customers, employees and partners by participating in the spectrum auctions. If the auction process is not followed, the Company would have no option but to be liquidated post September 7," Uninor Spokesperson said.
Uninor has recently applied before Foreign Investment Promotion Board to raise Rs 1,200 crore through a rights issue but was not approved.
Unitech has opposed the proposal and pointed out that matter of rights issue is pending before arbitration tribunal and the next date for hearing in the matter is on September 24 in Singapore.
"Uninor's continuing with the process is in sheer disregard to the rights of minority shareholders and the laws of India," Unitech said. "Further, not only will all equipment get transferred to another entity, even sensitive items such as all customer data will get transferred."
Uninor's vendors who aid in this transfer are equally at risk for this illegal transfer, it said.
"Further, any transfer of Uninor's business to a related party at throwaway price may result in actions against Uninor and its management from the lenders, vendors, etc. who are to recover money from Uninor," Unitech said, asking the government authorities to take note of its objections before granting any approvals for this asset auction and subsequent transfer.
Reacting to Unitech's allegations, Uninor said the auction will ensure transparency of the process.
"This is an open auction where any party keen to acquire Uninor's assets can bid and procure them. By agreeing to this process, infact Telenor Group is voluntarily subjecting itself to competitive bidding for Uninor's assets," it said in a statement.
Uninor said the proceeds from the auction will be utilised to settle outstandings towards Uninor's creditors.
"Further, any party that believes that these assets will be sold at a price lower than their real value, is welcome to participate in the open auctions and procure these assets," Uninor said.