Telenor wants compensation from Unitech for 2G licence cancellation

Norway’s Telenor Group made an indemnity claim against Unitech, the construction group and the joint venture partner in Uninor for cancellation of telecom licences and sought compensation for cancellation of 22 telecom licences.

Telenor is looking to end the relationship with Unitech and look for a new partner in India. 

“The Telenor Group holds Unitech liable for the breach of warranties related to the cancellation of the licenses – seeking compensation for all investment, guarantees and damages caused by the Supreme Court Order. Telenor Group also makes an indemnity claim against Unitech for cancellation is a clear breach of Unitech’s warranties,” a statement from Telenor said.

The Supreme Court of India on February 2 passed an order to revoke 122 licenses issued to all operators on and from January 10, 2008. This included all licenses issued to Uninor. Telenor Group invested Rs 6,100 crore for a 67.25 percent stake in Uninor and also provided guarantees for Rs 8,000 crore of short-term debt.

“The legality and validity of the licenses was a fundamental term of the share subscription agreement between Telenor Group and Unitech Limited. We believe that the Supreme Court’s cancellation of the Unified Access Service Licenses (UASL) conclusively demonstrates a clear breach of Unitech’s warranties,” said Pål Wien Espen, Group General Counsel, Telenor Group said in a statement.

"In the share subscription agreement between the partners, Unitech has irrevocably and unconditionally agreed to indemnify and hold harmless the Telenor Group from all damages which may be suffered as a result of breach of any of the agreed warranties," the statemen adds. 

“The fact is that Uninor as a consequence of the judgment will no longer hold any UASLs. Telenor will therefore exercise its entitled right under the share subscription agreement to hold Unitech Ltd. liable to indemnify and compensate Telenor Group for its investment in India,” said Pål Wien Espen in the statement.

“Telenor Group will consider every option available to secure the continued successful development of its mobile services in the country. It is Telenor Group’s position that the strategic partnership with Unitech Limited does not have a future, and it therefore will start the process of looking for a new Indian partner,” the Telenor statement added.

Unitech in its response denied any breach of warranties and accused Telenor of a violation of the confidentiality covenants of the shareholders’ agreement.

“At best, Telenor can claim damages from the government under the investment bilateral treaty. We reserve our right to take appropriate legal action against Telenor for damages caused to Unitech Group from breach of the confidentiality obligation by Telenor,” the Unitech statement said.

“The Hon’ble Supreme Court has cancelled all the UAS licenses issued on and after 10th January 2008 by questioning the government policy which in no manner can be considered as breach of warranties on our part,” the statement added expressing surprise at Telenor’s indemnity claim.

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