MUMBAI, India (AP) ? Norway’s Telenor will sever ties with its Indian partner and transfer its Indian telecom operations to a new entity after a top court canceled its licenses because of a multibillion dollar corruption scandal in the industry.
Telenor said Tuesday it will seek 74 percent ownership of the new entity, which will bid for fresh telecommunications licenses in an upcoming spectrum auction.
Earlier this month, India’s top court ordered the government to cancel 122 licenses ? a fifth of which belonged to Uninor? granted during an irregular sale of cell phone spectrum that cost the government billions in lost revenue.
Telenor has been operating in India through Uninor, a joint venture with India’s Unitech Ltd.
“We expect that the Uninor Board would, with prior consent from Indian authorities, transfer Uninor’s business into this new company at fair market value,” the company said in a statement.
Unitech reportedly vowed to fight back, saying it cannot be held responsible for the license cancellations.
“It is shocking that Telenor intends to transfer the entire business to a new affiliated entity owned by itself. This not only shows complete disregard and oppression of the minority shareholder by Telenor, but is also against all principles of related party transactions,” Unitech said, according to the Press Trust of India.
Telenor has been trying to distance itself from the telecommunications scandal, which is billed as one of the largest in Indian history.
It said it sent Unitech notice Tuesday that it was severing their relationship “on account of fraud and misrepresentation on their part as established by the Supreme Court judgment.”
Telenor is also seeking compensation from Unitech for damages caused by the Supreme Court order.
Telenor said it has invested 61.4 billion rupees ($1.25 billion) of equity and over 80.0 billion rupees ($1.6 billion) of debt in the Indian joint venture, which has over 40 million subscribers, more than 17,500 employees and a distribution network with over 400,000 points of sale.
Telenor said earlier this month that the cancellation of its Indian licenses led to a 1.9 billion kroner ($330 million) fourth-quarter loss.
Telenor valued the loss of Uninor’s 22 licenses at 4.1 billion kroner ($710 million), which reduced 2011 earnings to 7.9 billion kroner ($1.4 billion). That was down 45 percent from 14.3 billion kroner in 2010.