Unitech's shares surge after it opts out of Uninor

11 October, 2012

One of India's most respectable names in the realty market found itself in a sticky position when it entered the telecom industry along with its partner Telenor. A battle that started in early 2012 among the two parties of the JV seems to have come to an end with Unitech deciding to walk away by selling its stake to Telenor.

BARELY A week after Telenor’s representative senior advocate Sandeep Sethi appealed to the Delhi High court to allow the company to sell off its assets from the joint venture with Unitech, both companies are learnt to have reached a financial settlement over the dispute.

This presumably brings an end to a long bitter battle between India’s realty major Unitech and Norweigan telecom major Telenor over their joint venture company, Uninor in India. It all started earlier this year after Uninor lost all its 22 licenses of operation across the country after a Supreme Court ruling.

The financial details of the settlement remain unknown but according to an official statement, Unitech clarified that it will be pulling off its representatives from the board of Uninor and will sell off its stake to a new Telenor controlled company. The statement read, "...the parties agree to support the transfer of the business in Unitech Wireless (Uninor) to a new entity (NewCo) controlled by Telenor. Unitech has agreed to dispose of its shareholding in Uninor for a nominal amount and Unitech shall continue to retain its economic rights associated with its current shareholding in Unitech Wireless." The new company is expected to participate in fresh bid of 2G spectrums across the country opening up in November, 2012.

Analysts and common men across industries have welcomed the development. The market sentiments over the development seems to have worked in favour of Unitech and their share prices have witnessed an upward trend since the start of trading session on October 11, 2012.

Unitech’s exit from the troubled venture seems to have brought back smiles on a lot of realty investors too. “I was eagerly looking forward to book a flat this Navratra with their newly launched project Unihomes 3 in Noida extension, however everybody I spoke to advocated against it saying the company’s financial crunch will result in massive delay of the projects. I hope things will improve here on,” Ashok Kumar (name changed) said.

This will probably mark an end all speculations rising from the Uninor story that so far were seemingly creating a bad example of India’s 'unpredictable' business scenario, making many foreign investors skeptical.

Leading telecom sector analyst Mahesh Uppal said that although the amicable solution reached between Unitech and telenor is a good news, however, 'it is not going to have any major impact on the telecom industry'. "I personally do not visualise much impact because it is really a matter entirely related to two individual companies. However, there would be one less dispute. The dispute was commercial. I think it is a good news for companies but its impact on the sector will be minimal".

Mr. Uppal, however, added that the amicable solution will have some impact on the individual parties in their future ventures. “Having made an arrangement with an erstwhile partner impact future options with other players. Yes, I think they will have to reconsider the ownership of the new company and future partners.”