2G scam: Telenor demands compensation from Unitech

Telenor Group has issued a notice to its Indian strategic partner Unitech, that it will seek indemnity and compensation following the cancellation of Uninor’s 22 licenses by the Supreme Court of India.

The Supreme Court's decision of revoking of 122 licenses included all the licenses issued to Uninor. The apex court's decision refers to actions that happened prior to Telenor Group’s entrance into India.

Telenor blames Unitech for the breach of warranties related to the cancellation of the licenses seeking compensation for all investment, guarantees and damages caused by the court's order.

It is also making an indemnity claim against Unitech for the failure to obtain spectrum in the Delhi circle.

''The legality and validity of the licenses was a fundamental term of the share subscription agreement between Telenor and Unitech. 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 Pal Wien Espen, group general counsel, Telenor Group.

''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 liable to indemnify and compensate Telenor Group for its investment in India,'' he further added.

Unitech has clarified that it will be incorrect to claim or even suggest that the cancellation of the UAS licenses by the Hon'ble Supreme Court demonstrates a breach of any warranties on the part of Unitech and it is our firm belief that Unitech cannot be held liable for cancellation of licenses on account of alleged defect in the government policy.

The company has also said that they are surprised to receive the indemnity claim from Telenor Group taking a plea of the order passed by the Hon'ble Supreme Court and simultaneous release of press statement to the media by Telenor Group which is not only a clear violation of the confidentiality covenants agreed in the shareholder's agreement but also an action to malign the reputation of Unitech.

At best, Telenor Group can invoke the provisions between the governments for protection of their investment in India, but they shall have no valid claim on Unitech and any demand from Unitech shall be contested added Unitech.

The company will also be starting the process of looking for a new Indian partner.The company invested Rs 61 billion (NOK 8.9 billion) for 67.25 percent ownership in Uninor, and is also guaranteeing Rs 80 billion (NOK 8.1 billion) of short-term debt.