Telenor may quit India after licences revoked

OSLO Thu Feb 2, 2012 11:55pm IST

1 of 2. Jon Fredrik Baksaas, president and chief executive of Telenor in Oslo May 5, 2010.

Credit: Reuters/Heiko Junge/Scanpix

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OSLO (Reuters) - Norwegian telecom firm Telenor could quit India now after the Supreme Court revoked its mobile licences and not wait for new market rules to be introduced, the company's chief executive told Reuters.

The Supreme Court on Thursday revoked 122 telecoms licences issued under a scandal-tainted 2008 sale, including 22 licences Telenor holds via Uninor, a joint venture with real estate firm Unitech.

Affected licence holders can operate for four months, during which regulators will come up with new market rules.

Asked whether Telenor should heed calls by several company investors and analysts to quit the Indian market now and cut its losses, Jon Fredrik Baksaas said: "That is one alternative that is on the table."

"The ruling is a very serious attack on our investments, (which are) based on the licence framework that was spelt out in 2008," the chief executive said in an interview.

"We met every inch of that regulation of that licence. We have brought competition to the Indian market ... just to see a ruling that has significant retroactive consequences. It is an action that we have never seen in any country before."

Several Telenor investors and analysts said on Thursday the Norwegian firm should exit India.

India is the second-largest cellular market in the world by subscribers, with 894 million at the end of December, although fierce competition means call rates are among the lowest, hitting mobile operators' margins.

$3 BILLION TO BE INVESTED

Telenor was committed to invest a total of $3 billion in Asia's third-largest economy, Baksaas said.

"We are two-thirds of the way (in making those investments), to see them completely revised by (India) saying that 'oops, by the way, the 2008 licences have to be issued once more'."

Baksaas said the climate of uncertainty created by the ruling, and the four months of waiting before new rules are introduced, would immediately hurt its Indian joint-venture's activities.

"Obviously in a situation with the threat of taking your licence taken away, the value chain will start asking questions," Baksaas said.

"This has an extreme negative effect on further investments and further financing."

Asked whether Telenor would seek help from its main shareholder, the Norwegian government, in lobbying the Indian government Baksaas said: "That is part of the tool kit."

"You can be rest assured that we will make our voices heard with the Indian government tomorrow," said Baksaas.

One institutional investor Reuters spoke to said securing the Norwegian state's help would be the only way to rescue Telenor from the situation.

"This problem can only be solved by a political miracle," said the investor. "If Telenor wants to stay in India, they will need the help of the Norwegian government."

The Norwegian state has said in the past it would help Telenor with its problems in India, as it would with any other company.

"We follow the situation and are keeping close contacts with Telenor about this case," Norwegian trade and industry minister Trond Giske told Reuters, adding that the government was examining what course of action it could take with Indian authorities.

"Norwegian authorities will contribute actively to find a good solution and secure Telenor's large investments ... in India," he said.

(Reporting by Gwladys Fouche. Editing by Jane Merriman)

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