News From Telecom World

Telenor to buy $1.2bn stake in Unitech telecom unit

Posted on: October 30, 2008

60% stake in telecoms start-up sees Telenor become the latest foreign company to enter India’s mobile market.

Norway’s Telenor ASA said Wednesday it will spend more than INR61.20 billion ($1.2 billion) to buy up to a 60% stake in a startup telecommunications unit of India’s Unitech Ltd., becoming the latest foreign company enter the world’s second-biggest and fiercely competitive mobile phone market.

Under the pact, Telenor will subscribe to new shares in Unitech Wireless, resulting in an enterprise value of INR116.20 billion for the telecom unit, New Delhi-based Unitech said in a statement.

Unitech Wireless will compete with players such as Bharti Airtel Ltd., the largest by mobile users, and Reliance Communications Ltd., the second largest, along with Vodafone for a share of India’s telecom market.

“The market here (in India) is already quite crowded, I admit that. The competitors that we will meet are very professional already. However, with Unitech together, we feel that there is room for another entrant,” Sigve Brekke, executive vice president and head of Telenor Asia, told reporters.

The transaction is subject to approval from regulatory authorities in India, the statement said.

New Delhi-based Unitech is one of India’s leading realty companies by sales, while Oslo-based Telenor is owned 54% by Norway’s ministry of industry and trade.

A partnership with Unitech will help Telenor foray into India’s mobile phone market, where more than 8 million users are added each month. The strong growth potential has led global companies such as Vodafone Group PLC and Virgin Mobile to enter the South Asian country via acquisitions or alliances.

Unitech Wireless, a wholly owned unit of Unitech, has received licenses to operate telecommunications services in all of India’s 22 service areas. It plans to initially start operations in the first half of 2009 under the global system for mobile communications technology, for which it has been allocated spectrum, or radio bandwidth.

“We view India as a huge opportunity. For us, India is not just one country. For us, it is probably like 16 new countries if you look at the size of the regions,” Brekke said.

The country’s mobile phone user base is expected to exceed 737 million by 2012, growing 21% a year from 2008, IT research and advisory firm Gartner Inc. said in a recent report. It had more than 315 million users at the end of September, according to government data.

Telenor’s equity injection in Unitech Wireless will be made by Telenor Asia Pte. Ltd. in four installments to be completed by the end of September 2009, the Telenor statement said. The first tranche of the investment will be equal to a 20% stake in Unitech, Brekke said.

“The investment will be funded through drawdown on existing credit facilities and/or issuance of short-term commercial paper,” Telenor said, adding it intends to raise about NOK12 billion via a rights issue in the first quarter of 2009.

Unitech said it will invest more than $3 billion as part of its plans to become a long-term telecom operator in India.

Unitech, DLF Ltd. and other realty companies in India are diversifying into sectors such as telecommunications and insurance as six-year high loan rates and higher property prices damp demand in the real estate sector.

A Mumbai-based analyst, who asked not to be named, said that initial losses in the telecom business are likely to drag Unitech’s overall earnings.

“The wireless business will be making losses for the next five years when it will try and establish its presence in India,” he said.

The telecom unit currently has 250 employees across the country, the statement said.

Source: Total Telecom

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1 Response to "Telenor to buy $1.2bn stake in Unitech telecom unit"

Yes I am agree with you. Unitech Wireless paid Rs. 1621 crores to the government for the licence and spectrum and the company has been valued at Rs. 11,620. This means that the licence/spectrum has been valued at an astronomical value of Rs. 11,620 crores. In ten months, Unitech had made a profit of Rs. 9,999 crores.

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