Norwegian telecom major Telenor today wrote off its
remaining fixed and intangible assets in India worth 3.9 billion Norwegian
krone (Rs 3,583 crore). And, the company said it was likely to quit the country
if the Telecom Regulatory Authority of India (Trai) recommendations of a steep
base price for re-auction of 2G band spectrum were accepted by the government.
With this, Telenor, which holds 67 per cent stake in Unitech Wireless, has
written down investments to the tune of 8.1 billion NOK (Rs 7,403 crore) in two
tranches in its Indian mobile arm. following the Supreme Court's order
cancelling 122 of the 2G licences in February this year. Earlier, it had
written down 4.2 billion NOK. Blaming its decision on the uncertainty clouding
the sector after the cancellation of licences by the SC and subsequent
re-auction recommendations of Trai, it said, in a statement: “As a
precautionary measure, Telenor ASA has decided to write down the remaining
fixed and intangible assets in India, amounting to NOK 3.9 billion (NOK 2.6
billion after non-controlling interests).”
The write down will be included in Telenor's results for the
first quarter of 2012, to be presented on May 8. Though Siggve Brekke, the Asia
head of Telenor, said the move did not mean the company “is exiting India,” he
said if things did not improve, they would eventually have to take such as
decision. “If the Trai recommendation becomes policy, then the government is
forcing us to leave. It's quite clear that it will not work for us,” Brekke told
reporters. After the write downs,Telenor has no further accounting exposure
related to India as of March 31. In its statement, the company added:
“Following the Supreme Court's ruling in February to cancel Uninor's licenses
and the recent recommendation from the Telecom Regulatory Authority of India
regarding the 2G license re-auction, the uncertainty has increased
significantly.” If the recommendation from Trai in its current form should be
approved by the department of telecommunications, it would be almost
impossible, says Telenor, to participate in the auction.
It was working actively towards Indian authorities bringing
forward an acceptable framework for continued operations, it added. The telecom
regulator has suggested the government start the auction with a base price of
Rs 3,600 crore per MHz. Brekke said there were three reasons why the
recommendations do not make a business case. “Auction of 5MHz spectrum is not
an auction. It's a trial balloon and the government is only trying to set the
price level for future rounds. We can't do with so little spectrum,” he said.
Second, he said the reserve price of Rs 3,600 crore was too high. Brekke added
the rollout obligations — mandating each operator set up infrastructure in
villages with a population of at least 2,000 was also not acceptable. “It isn't
logical to ask each operator to set up its own tower in every village when this
is done (in a ) smarter (way) through collaboration and sharing between
operators,” he said.
Source: Business Standard
The main issue with Telenor is that whether they made underhand payments to ge the licenses. If they did, then they fully deserve the SC ruling. Foreign investors should be held just as guilty of bribing government to get business favors. They are not saints either (Enron comes to mind) and should be taught a lesson as a deterent to future investments. However, if Telenor played straight then they should should be shielded from any losses.
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