Telenor amends Unitech Wireless acquisition plans

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Telenor, a telecommunications company with strongholds in Scandinavia and Eastern Europe, has cancelled a $1.7 billion rights issue which would have facilitated the 60% stake purchase in Unitech Wireless. The Norway based company now plans to raise the required money through cash and additional debts.

Unitech Wireless, which already has telecom licenses for 22 circles, was all set to give Telenor entry to the fiercely competitive and progressive Indian Telecom market. But the recent statement from Telenor says that the company will proceed with the acquisition plans in the first quarter of 2009, instead of its earlier schedule of last quarter of 2008.

This means increased pressure on Unitech, the parent company of Unitech wireless, as it had planned to use the Rs 800 Cr from the deal to repay debts by the end of this financial year. Unitech has to pay a whooping Rs. 2,500 crore as debt repayments by March 31st.

Telenor had reportedly agreed on the stake purchase with the condition that Unitech Wireless make deals with other telecom operators to share towers. It is expected that Telenor will approach the deal with utmost caution since the survival for a new telecommunication company requires sound capital flow and an efficient business model.

With 54% stake owned by the Norwegian government, Telenor is regarded as the seventh largest telecom company in the world. It will propose no dividends be paid to shareholders for the years 2008 and 2009.